A semi-conductor company in California will significantly expand her chemical vapor deposition units in their various production sites in south-west of the United States. The cash flow for one phase of the project is shown below. Given reinvestment rate of 15% per year for excess funds and 11 % per year for borrowing rate for extra funds, with 13 % MARR, determine: Year Net cash flow 0 -48000 +20000 2 -90,000 3 +64000 4 -10,000 5 -33,000 a) Determine the number of possible ROR values and why? b) Calculate the external rate of return (MIRR). c) Is the project economically viable?
A semi-conductor company in California will significantly expand her chemical vapor deposition units in their various production sites in south-west of the United States. The cash flow for one phase of the project is shown below. Given reinvestment rate of 15% per year for excess funds and 11 % per year for borrowing rate for extra funds, with 13 % MARR, determine: Year Net cash flow 0 -48000 +20000 2 -90,000 3 +64000 4 -10,000 5 -33,000 a) Determine the number of possible ROR values and why? b) Calculate the external rate of return (MIRR). c) Is the project economically viable?
Chapter9: Capital Budgeting Techniques
Section: Chapter Questions
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Transcribed Image Text:Problem 1
A semi-conductor company in California will significantly
expand her chemical vapor deposition units in their various
production sites in south-west of the United States. The cash
flow for one phase of the project is shown below. Given
reinvestment rate of 15% per year for excess funds and 11 % per
year for borrowing rate for extra funds, with 13 % MARR,
determine:
Year Net cash flow
0 -48000
+20000
2 -90,000
3
+64000
4 -10,000
5 -33,000
a) Determine the number of possible ROR values and why?
b) Calculate the external rate of return (MIRR).
c) Is the project economically viable?
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