Your firm is considering a project that will cost $4.619 million up front, gener

Question

Your firm is considering a project that will cost $4.619 million up front, generate cash flows of $3.53 million per year for 3 years, and then have a cleanup and shutdown cost of S6.01 million in the fourth year. a. How many IRRs does this project have? b. Calculate a modified IRR for this project assuming a discount and compounding rate of 10.3%. c. Using the MIRR and a cost of capital of 10.3%, would you take the project? a. How many IRRs does this project have? The project has | | IRRs. (Select from the drop-down menu.) b. Calculate a modified IRR for this project assuming a discount and compounding rate of 10.3%. The MIRR for this project is L196. (Round to two decimal places.) C. Using the MIRR and a cost of capital of 10.3%, would you take the project? (Select from the drop-down menu.) | , the project should be taken because the MIRR> 10.3%.

Explanation / Answer

a) The project has two IRRs as the cash flows change sign twice.

b) MIRR can be calculated using MIRR function in excel. MIRR = 10.47%

c) Yes, as the MIRR > 10.3%

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