Bellinger Industries is considering two projects for inclusion in its capital bu

Question

Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 9%.

a. What is Project A's MIRR? Round your answer to two decimal places. Do not round your intermediate calculations.

b. What is Project B's MIRR? Round your answer to two decimal places. Do not round your intermediate calculations.

Project A -1,000 700 450 280 330 Project B -1,000 300 385 430 780

Explanation / Answer

Answer:

WACC 9% 9% Years Project A Project B 0 -1000 -1000 1 700 300 2 450 385 3 280 430 4 330 780 MIRR 20.04% 20.30%

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