Calculate the npv-irr and mirr, Finance Basics

Task:

  • Decide upon 2 mutual exclusive projects.
  • Calculate the income statement, balance sheet, and statement of cash flows for all year
  • Calculate the NPV, IRR, and MIRR.
  • Check if IRR and MIRR are consistent with the NPV for various rates of cost of capital.

Assumptions:

  • One project has a reinvestment in the middle of its productive life of 50% of the initial cost
  • Project length is at least 4 years
  • 30% annual growth of Revenues
  • Profit Margin 2% in t=0 (that might change over time)
  • Dividend is 0% of net income
  • You are operating at 100% capacity in year zero and thereafter
  • Initiating the investments will have some impact on net working capital
  • At least one of your balance sheet entries, such as inventory, should be forecasted based on a regression (utilize the attached historic data)
  • If you need additional financing, finance 40% with debt and 60% with equity
  • You will finance 40% of the asset with debt in either case
  • Taxes are 35%, cost of debt is 5% and cost of equity is 12%
  • Customers pay after 60 days
  • Suppliers are paid after 90 days
  • If you sell your assets in the final year you will incur an extraordinary gain
Posted Date: 3/8/2013 4:23:13 AM | Location : United States







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