Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. the director of capital budgeting for giant inc. h

The director of capital budgeting for Giant Inc. has identified two mutually exclusive projects, L and...

Free

80.2K

Verified Solution

Question

Finance

The director of capital budgeting for Giant Inc. has identifiedtwo mutually exclusive projects, L and S, with the followingexpected net cash flows: Expected Net Cash Flows Year Project LProject S 0 ($100) ($100) 1 10 70 2 60 50 3 80 20 Both projectshave a cost of capital of 12 percent. What is Project S's MIRR?What is Project L's MIRR?

Answer & Explanation Solved by verified expert
4.0 Ratings (761 Votes)

Computation of MIRR
Year project L project S
0 -100 -100
1 10 70
2 60 50
3 80 20
we have to first compute the future value of the cash flow from year 1 to 3 for project L
Year project L Future value
1 10 12.544 =10*(1+12%)^2
2 60 67.2 =60*(1+12%)^1
3 80 80 80
future value 159.744
now we have to use financial calculator to compute the MIRR
Put in calcluator
PV -100
PMT 0
FV 159.744
N 3
Compute I 16.90%
therefore MIRR of L = 16.90%
we have to first compute the future value of the cash flow from year 1 to 3 for project S
Year project S Future value
1 70 87.808 =70*(1+12%)^2
2 50 56 =50*(1+12%)^1
3 20 20 20
future value 163.808
now we have to use financial calculator to compute the MIRR
Put in calcluator
PV -100
PMT 0
FV 163.808
N 3
Compute I 17.88%
therefore MIRR of S = 17.88%
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Accounting
1.2K views

Marko Company sold spray paint equipment to Spain for 4,000,000 pesetas (P) on October 1, with...

Mechanical Engineering
1.2K views

An air-standard dual cycle has a compression ratio of 9.1 and displacement of Vd = 2.2...

Biology
1.2K views

Which of these is NOT an example of chemistry associated with a pair of glasses...

Physics
1.2K views

A material B has twice the specific resistance of A A circular wire made of...

Algebra
1.2K views

8 Solve the system of equations by elimination 9x 3y 36 8x 4y 28 x...

Algebra
1.2K views

Question 8 y Write an equation for a line parallel to y 3x 1 and...

Accounting
1.2K views

Journalize the following merchandise transactions, using the net method under a perpetual inventory system. a....

Accounting
1.2K views

Six Measures of Solvency or Profitability...

Accounting
1.2K views

Maine Pine Corp. has Net Income of $20,000, Sales of $230,000, Taxes of $10,000, Assets...

Accounting
1.2K views

Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves....

Accounting
1.2K views

A company uses a periodic inventory system. On August 1, the company had 6 items...

Accounting
1.2K views

9. What is the estimated raw materials inventory balance at the end of July? ...