Answer Questions 11-15 based on the following information about C Project A has

Question

Answer Questions 11-15 based on the following information about C Project A has a cost of $17.0M & delivery & installation costs of l.mne) 1o 1 SM. Weighted Average Cost of Capital 5. recast Capital Projects A&z.; (WACC)-15 %. The FCF growth rate (G) after the 5th year in the ( Terminal Value (TV)-(FCFs) (1+G)-(WACC-G) Expected Net After-Tax Free Cash Flows for Project A are shown Year Net Free Cash Flow (MS) to consider the delivery/installation costs) 5.5 8.7 11.9 15.1 12.0 4 (remember to consider the "terminal va lue")

Explanation / Answer

Option B

Cash flows would be

Year 0: -17-1.5=-18.5

Year 1: 5.5

Year 2: 8.7

Year 3: 11.9

Year 4: 15.1

Year 5: 12+Terminal Value=106.15

Terminal Value=Cash flow in Year 6/(r-g)=12*1.02/(0.15-0.02)=94.15

Future Value of cash flows at year 5: 5.5*1.15^4+8.7*1.15^3+11.9*1.15^2+15.1*1.15+106.15=162.1

Present value of initial investment=18.5

MIRR=(FV of cash flows/PV of investment)^(1/n)-1

So, MIRR=(162.1/18.5)^(1/5)-1

Hence, MIRR=54.356%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.