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1. A firm with a 10.5 percent cost of capital is considering a project for this year's capital bu

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1. A firm with a 10.5 percent cost of capital is considering a project for this year's capital budget.  The project's expected after-tax cash flows are as follows:

Year:	0	1	2	3	4
Cash flow:	-$15,000	$7,100	$6,800	$6,900	$7,100

Calculate the project's modified internal rate of return (MIRR).

2. Project Z has an initial cost of $59,849, and its expected net cash inflows are $14,750 per year for 9 years.  The firm has a WACC of 14 percent, and Project Z's risk would be similar to that of the firm's existing assets.  Calculate the discounted payback period of Project Z.

present value of cash inflows = 72958.9846 cumulative discount factors = 4.94637184 discounted Payback = 1.21905102 or 1.22 years

 

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Oct 14, 2020

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