Calculate net present value-modified internal rate of return

Assignment Help Financial Management
Reference no: EM131023096

An expansion project being considered by your firm has an initial cost of $1,250,000 and expected net cash flows of $270,000 per year for the first 3 years, and $380,000 per year for the next three years. All cash flows will occur at the end of each year. Assume that the project will be terminated at the end of the sixth year. Your firm’s cost of capital is 11%. Calculate the Net Present Value (NPV), the Modified Internal Rate of Return (MIRR), the Profitability Index and the Discounted Payback, and the Equivalent Annual Annuity for this project. Should the project be accepted? Why or why not?

Reference no: EM131023096

Questions Cloud

About rat race home security : Use the following information about Rat Race Home Security, Inc. to answer the questions: Average selling price per unit $318. Variable cost per unit $191 Units sold 480 Fixed costs $9,389 Interest expense $15,645 Based on the data above, what is the..
Personal experience involving a natural or man-made crisis : As more companies expand internationally, having a global mindset is more important than it has been at any previous point in history. Share with us a personal experience involving a natural or man-made crisis or disaster that interrupted your normal..
Depreciate the cost of the tools on a straight-line basis : Kohers Inc. is considering a leasing arrangement to finance some manufacturing tools that it needs for the next 3 years. The tools will be obsolete and worthless after 3 years. The firm has the option to buy these tools. The firm will depreciate the ..
The accounting break-even production quantity for a project : The accounting break-even production quantity for a project is 5,799 units. The fixed costs are $92,640, the depreciation is $36,210, and the sales price per unit is $48.29. What is the variable cost per unit?
Calculate net present value-modified internal rate of return : An expansion project being considered by your firm has an initial cost of $1,250,000 and expected net cash flows of $270,000 per year for the first 3 years, and $380,000 per year for the next three years. Calculate the Net Present Value (NPV), the Mo..
Granfield company is considering eliminating : Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,200. The division sales for the year were $963,800 and the variable costs were $477,000.
Considering the purchase of a machine with capital budget : Builtrite has estimated their cost of capital is 14% and they are considering the purchase of a machine with the following capital budget: Initial Investment $62,000 RATFCF Year 1 $22,000 RATFCF Year 2 $30,000 RATFCF Year 3 $38,000 What is the machin..
One result of more institutional ownership-restructuring : Corporate restructuring has been one result of more institutional ownership. Restructuring can cause
Ready company has two operating departments : The total amount of administration expense that should be allocated to the Assembly Department for the current period is:

Reviews

Write a Review

 

Financial Management Questions & Answers

  Using the P-E ratio-compute the current EPS

The stock of Ragnar Lothbrok's Viking Cruises is currently selling for $117.13, which equates to a P/E ratio of 16x. Using the P/E ratio, compute the current EPS of Mr. Lothbrok's stock.

  Cost of equity using dividend discount model-cost of debt

Bernice first examined Sea Shores Salt most recent balance sheet summarized: Assets: Working Capital $200 Plant and Equipment $360 Other assets $40 Total $600 Liabilities and Net worth Bank Loan $120 Long Term Debt $80 Preferred Stock 100 Common Stoc..

  Discount bond as the time to maturity decreases

What happens to a discount bond as the time to maturity decreases?

  Bond equivalent and discount yields

The treasurer of a large corporation wants to invest $33 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 4.21 percent; that is, the EAR for this investment is 4.21 per..

  How depreciation expense is handled in the face of inflation

Which of the following is representative of how depreciation expense is handled in the face of inflation? A. The depreciable base is not altered by inflation. B. It decreases annually in nominal terms. C. The real value of the depreciation is fixed. ..

  Duration of two-year bond that pays an annual coupon

What is the duration of a two-year bond that pays an annual coupon of 12 percent and has a current yield to maturity of 14 percent? Use $1,000 as the face value.

  Build the is-lm function

Build the IS-LM function - analyze the behavior of the markets for goods and money for each area.

  What will be the initial dilution in earnings per share

Columbia Corporation expects earnings of $8,000,000 in the current year on 6,000,000 shares of common stock. The company is considering the effects on reported earnings of issuing an additional 2,000,000 shares of common stock. What will be the initi..

  About the share price

Bill’s Bakery has current earnings per share of $2.5. Current book value is $4.3 per share. The appropriate discount rate for Bill’s Bakery is 17 percent. Calculate the share price for Bill’s Bakery if earnings grow at 3.4 percent forever.

  Deduction for purposes of calculating taxable income

ATIRR Unlevered: Income taxes are taken into account in the calculation of IRR. 75% of Mr. Beyer’s purchase price of $92,000,000 is attributable to the improvements (the building) and will be depreciated on a 39-year straight-line basis. As you know,..

  What is the current value of this stream of cash flows

Suppose that you will receive annual payments of $21,400 for a period of 22 years. The first payment will be made 7 years from now. If the interest rate is 7.50%, what is the value of the annuity in year 6, what is the current value of this stream of..

  What is the intrinsic value of stock

ABC Corp. has just paid a quarterly dividend of $0.28. ABC's dividends will grow by 5% for the next 4 quarters, and then grow by 0.6% thereafter. ABC has a quarterly required return of 4%. What is the intrinsic value of ABC stock?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd