Answered: Project A costs $1,000, and its cash…

Project A costs $1,000, and its cash flows are the same in Years 1 through 10. Its IRRis 16%, and its WACC is 8%. What is the project’s MIRR?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 15EB: Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is...

See similar textbooks

Related questions

Q: A four-year life project has an initial capital expenditure of $3,000 and annual operating costs…

A: Initial Capital expenditure(CAPEX) is $3000 Operating cost starting from end of 1st year is $2000…

Q: n investment project has annual cash inflows of $27,000. The project requires an initial investment…

A: Payback period is the no. of years required to recover the initial amount invested.

Q: he irr of the project is 12% and the present value of operating cash flow is $ 22000 the life of the…

A: Break-even point is calculated by dividing the fixed cost by the contribution margin.

Q: Project L costs $50,000, its expected cash inflows are $8,000 per year for 7 years, and its WACC is…

A: Project's Payback Period = Initial Investment / Expected annual cash inflows

Q: Suppose that cash flows of a project are given as follows: Year 0: Costs: $150,000. Year 1: Costs:…

A: Payback Period - It is the duration of the project life within which the initial investment is…

Q: Project K costs $55,000, its expected cash inflows are $13,000 per year for 8 years, and its WACC is…

A: Hi there, Thanks for posting the question. But as per our Q&A guidelines, we should answer the…

Q: Project K costs $75,000, its expected cash inflows are $15,000 per year for 10 years, and its WACC…

A: Calculate the payback period as follows: Payback period = Initial investment / Cash inflows

Q: Project A costs $41,425 and has a WACC of 13%. Its expected net cash as follows: Year: 0 1 2 3 4 CF:…

A: IRR is internal rate of return at net present value is zero that means present value of cash flow is…

Q: A project has the following cash flows; cost =10,000, years 1-5 incoming cash flows are $5,000 each,…

A: Present values of cashflows = cashflow for each year/(1+ WACC)^time For year 1: PV = 5000/(1+0.1)^1…

Q: A project is expected to generate annual revenues of $117700, with variable costs of $74,800, and…

A: The term "annual sales revenue" shows the gross earnings before adjusting any expenses generated by…

Q: Project K costs $51275, its expected net cash inflows are $13000 per year for 7 years, and its WACC…

A: Net present value is present value of cash inflows minus present value of cash outflows. Present…

Q: Project A costs $41400, its expected net cash inflows are $13400 per year for 8 years, and its WACC…

A: Here, The present value of net cash inflows is 'PVCI' Future value is 'FV' Cost of capital is 'r'…

Q: Suppose a project costs $2,200 and produces cash flows of $640, $800 and $1,900 in each of the first…

A: IRR can be calculated by following function in excel IRR can be calculated by following function…

Q: A project capitalized for ₱47,000 invested in depreciable assets will earn a uniform, annual income…

A: The rate of return may be used for real estate, bonds, equities, and fine art. The rate of return…

Q: Project L costs $40,000, its expected cash inflows are $11,000 per year for 11 years, and its WACC…

A: Project's Payback period = Initial Investment / Annual Cashflow

Q: Two projects, Alpha and Beta, are being considered using the payback method. Each has an initial…

A: Payback period: The payback period is the time period required to recover the initial investment of…

Q: A project that provides annual cash flows of $72,000 for 6 years costs $263,000 today. If the…

A: Initial Cost = 263,000 Annual Cash Flow = 72,000 N = 6 years Required Return = 14%

Q: Project L costs $47,709.10, its expected cash inflows are $10,000 per year for 10 years, and its…

A: Project's IRR is the rate at which NPV of the project is zero

Q: onsider the following project. Costs: $100,000, at time t = 0. $45,000, at time t = 4. Income: Three…

A: The question is based on the concept of calculating the future value of cash flows in a project at…

Q: Project A has an initial outlay of $65,000. The project will generate the following cash inflows:…

A: Initial cash outflow = $65,000Cost of capital = 10%Cash inflow in 1 year = $7,500Cash inflow in 2…

Q: A project requires an initial outlay at t = 0 of $4,000, and its cash flows are the same in Years 1…

A: Weighted Average cost of capital (WACC): The WACC is the overall cost of capital from all the…

Q: Project S costs $17,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually…

A: Concept: The term NPV is defined as the net present value. It is mainly the difference between the…

Q: abc Inc., is considering two projects. Each requires an initial investment of $100,000. John Proton,…

A: The question is related to Capital Budgeting. The Payback period is the length of time required to…

Q: What is the project's NPV?

A: NPV is an abbreviation for Net Present Value. For example, NPV helps us to know the present value of…

Q: Project K costs $60,000, its expected cash inflows are $15,000 per year for 8 years, and its WACC is…

A: a) Computation of NPV:

Q: Answer each independent question, (a) through (e), below. a. Project A costs $10,000 and will…

A: Note: Given Question consists of multiple questions and no particular one question is being…

Q: Project A costs $67,775, its expected net cash inflows are $10,000 per year for 10 years, and its…

A: The modified internal rate or return(MIRR) is used to calculate equated worth of generated cash…

Q: Project K costs $50,000, its expected cash inflows are $11,000 per year for 11 years, and its WACC…

Q: Project A costs $3,000, and its cash flows are the same in Years 1 through 10. Its IRR is 14%, and…

A: Excel Spreadsheet:

Q: A 17-year project has a cost of $900,000 and has annual cash flows of $140,000 in years 1-8, and…

A: NPV is the sum of present value of future cashflows less initial investment

Q: A project has estimated annual net cash flows of $36,500. It is estimated to cost $222,650.…

Q: If the cost of a project is $50,000 and the cash inflows are as given in the table below, what is…

A: given cost of project =$50000

Q: Project K costs $55,000, its expected cash inflows are $13,000 per year for 8 years, and its WACC is…

A: The computation of the discounted payback period as follows: The formula used for the computation…

Q: project has an initial cost of $7,000. The cash inflows are $1,000, $2,600, $3,000, and $4,000 over…

A: The payback period represents the time it would take an investor to reach a breakeven point or…

Q: Two projects, Alpha and Beta, are being considered using the payback method. Each has an initial…

A: The payback period is the time period in which the project will generate enough cash to pay back the…

Q: st of a project is $50,000 and it generates cash inflows of $20,000, over four years. Calculate IRR…

A: IRR or Internal rate of return can be computed using IRR function in excel.

Q: A project with a life of 6 years is expected to provide annual sales of $380,000 and costs of…

A: Given: Particulars Base case Sales $380,000.00 Cost $269,000.00 Tax rate =21%

Q: 1－Project K costs $75,000, its expected cash inflows are $15,000 per year for 10 years, and its WACC…

A: Part 1:Payback period refers to the time period required for an investment to recover its initial…

Q: Answer each independent question, (a) through (e), below. a. Project A costs $5,000 and will…

A: * As per Bartleby guideline, if question contains multiple question then answer first three only.…

Q: Project NAG generates positive cash flows of $60,000 per year at the end of each of the next five…

A: In we need to calculate the cost of project from net present value.

Q: The IRR of the project is 12% and the present value of operating cash flow is $22,000. The life of…

A: IRR= 12% PV of operating cash flow= $22,000 Project Life= 6 years Fixed cost= $2,000 per year…

Q: What is the payback period for this investment under the assumption that the cash inflows occur…

A: Payback Period: It is the period of a project in which it recovers its initial cost of investment.…

Q: Two projects, Alpha and Beta, are being considered using the payback method. Each has an initial…

A: The payback period is the time period in which a project will generate enough cash flows that will…

Q: ost of a project is $50,000 and it generates cash inflows of $20,000, over four years. Calculate…

A: NPV or Net present value can be computed using NPV function in excel.

Q: You are considering two mutually exclusive projects, A and B. Project A costs $90,000 and generates…

A: given, project A: cost = $90,000 annual cashflow = $15,000 years = 8 project B: cost =$100,000…

Q: Project L costs $65,000, its expected cash inflows are $8,000 per year for 9 years, and its WACC is…

A: IRR is the rate at which NPV is Zero

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Project A costs $1,000, and its cash flows are the same in Years 1 through 10. Its IRR
is 16%, and its WACC is 8%. What is the project’s MIRR?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two, $2,500 in year three, $3,000 in year four and $2,000 in year five. What is the NPV using 8% as the discount rate?
Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for five years. What is the NPV using 8% as the discount rate?
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: If the discount rate is 12%, compute the NPV of each project.
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?
The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net cash inflows are expected to be $27.7 million, all coming at the end of Year 1. The land must be returned to its natural state at a cost of $25 million, payable at the end of Year 2. Plot the project’s NPV profile. Should the project be accepted if r = 8%? If r = 14%? Explain your reasoning. Can you think of some other capital budgeting situations in which negative cash flows during or at the end of the project’s life might lead to multiple IRRs? What is the project’s MIRR at r = 8%? At r = 14%? Does the MIRR method lead to the same accept-reject decision as the NPV method?
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?