Final Exam F Microsoft E HomeInsertPage LayoutFormulas Data Review View s Cut 1
ID: 2794748 • Letter: F
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Final Exam F Microsoft E HomeInsertPage LayoutFormulas Data Review View s Cut 1 Copy B 1 -li - 0 ,-- da Merge & Center. $ % , isa 8 C Conditional Format Cell Formatting, as Table Styles l. Insert Delete Format Paste Format Painter I U a Sort & Find & 2 Clear Filter Select Ed ting Clipboard Alignment Cells 0 An o il company needs to decide between a small and large oil pump. Pump 1 is a small pumpt, pump 2 is a larger pump that costs more but also pumps more oil. The firm's MARR is 20%, with a reinvestment rate of 10% and a financing rate of 6%. Year Pump 1 Pump 2 0 (100,000)$(115,000) $(15,000 1 $ 70,000 $ 115,000 45,000 2 70,00060,000 $(10,000) 3 70,00035,000 $(35,000) 13 15 17 19 20 21 Without using the MIRR excel function, estimate the MIRR on the incremental investment for this scenario. 24 25 1 Overview /01 O2 Q ^ I..-11 its ENG 10.25 AM 12/2/2017Explanation / Answer
MARR: 10% e: 6% n 3 Period Net Cash Flow Negative Positive Final FV Rate FV 0 -1,00,000.00 -1,00,000.00 - -1,00,000.00 1 70,000.00 - 70,000.00 70,000.00 1.12 78,652 2 70,000.00 - 70,000.00 70,000.00 1.06 74,200 3 70,000.00 - 70,000.00 70,000.00 1.00 70,000 2,22,852 MIRR=(222852/100000)^(1/3)-1 30.62% MARR: 10% e: 6% n 3 Period Net Cash Flow Negative Positive Final FV Rate FV 0 -1,15,000.00 -1,15,000.00 - -1,15,000.00 1 1,15,000.00 - 1,15,000.00 1,15,000.00 1.12 1,29,214 2 60,000.00 - 60,000.00 60,000.00 1.06 63,600 3 35,000.00 - 35,000.00 35,000.00 1.00 35,000 2,27,814 MIRR=(227814/115000)^(1/3)-1 25.59% As MIRR is higher in Pump 1, so it should be accepted
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