Internal rate of return and modified internal rate of return. Quark Industries has three potential projects, all with an initial cost of $2,100,000. Given the discount rate and the future cash flow of each project in thefollowing table, E, what are the IRRS and MIRRS of the three projects for Quark Industries? Cash FlowProject MProject NProject OYear 1$500,000$700,000$1,100,000Year 2$500,000$700,000$900,000Year 3$500,000$700,000$700,000Year 4$500,000$700,000$500,000Year 5$500,000$700,000$300,000Discount rate7%12%15%

The given problem can be solved using IRR and MIRR function in excel.

Cash Flow Project M Project N Project O Year 1 $500,000 $700,000 $1,100,000 Year 2 $500,000 $700,000 $900,000 Year 3 $500,000 $700,000 $700,000 Year 4 $500,000 $700,000 $500,000 Year 5 $500,000 $700,000 $300,000 Discount rate 7% 12% 15%

Cash Flow Project M Project N Project O Year 1 $500,000 $700,000 $1,100,000 Year 2 $500,000 $700,000 $900,000 Year 3 $500,000 $700,000 $700,000 Year 4 $500,000 $700,000 $500,000 Year 5 $500,000 $700,000 $300,000 Discount rate 7% 12% 15%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 15P

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Question

Internal rate of return and modified internal rate of return. Quark Industries has three potential projects, all with an initial cost of $2,100,000. Given the discount rate and the future cash flow of each project in the
following table, E, what are the IRRS and MIRRS of the three projects for Quark Industries?

Cash Flow
Project M
Project N
Project O
Year 1
$500,000
$700,000
$1,100,000
Year 2
$500,000
$700,000
$900,000
Year 3
$500,000
$700,000
$700,000
Year 4
$500,000
$700,000
$500,000
Year 5
$500,000
$700,000
$300,000
Discount rate
7%
12%
15%

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