Suppose your firm is considering investing in a project with the cash flows show

Question

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3 and 3.5 years, respectively.

Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3 and 3.5 years, respectively.

  Time: 0 1 2 3 4 5   Cash flow –$245,000 $63,800 $82,000 $137,000 $120,000 $79,200

Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Should it be accepted or rejected?

Explanation / Answer

We can use MIRR formuale in excewl to eavluate this project

=Mirr(values,finance rate,reinvest rate)

Here the values means all the cash flows

finance rate=reinvest rate=12%

MIRR=19.66%

since it is greather than 12% we can accept the project

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