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9 and 10
Use the following information for the next 2 questions. Frieda Inc. is considering a capital expansion project. The initial i
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Answer #1

Let the cash flows in year n be denoted by CFn

Given,
CF0 = -114500
CF1 = 19850
CF2 = 24780
CF3 = 33960
CF4 = 51236
CF5 = 55780

Cost of capital = r = 18%

9.

NPV = -CF0 + CF1/(1+r) + CF2/(1+r)2 + CF3/(1+r)3 + CF4/(1+r)4 + CF5/(1+r)5

= -114500 + 19850/(1+0.18) + 24780/(1+0.18)2 + 33960/(1+0.18)3 + 51236/(1+0.18)4 + 55780/(1+0.18)5

= -$8403.34

10.

MIRR = ( FVc / PVfc )1/n -1

where, FVc is the  future value of positive cash flows

and PVfc is the present value of negative cash flows

CF0 = -114500
CF1 = 19850
CF2 = 24780
CF3 = 33960
CF4 = 51236
CF5 = 55780

PVfc = 114500

FVc = 19850(1+0.18)4 + 24780(1+0.18)3 + 33960(1+0.18)2 + 51236(1+0.18) + 55870 = 242813.46

Hence, MIRR = (242813.46/114500)1/5 - 1 = 0.1622 = 16.22%

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