Question 6: List the steps involved in computing the Internal Rate of Return (IRR) and Modified...

 

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Question 6: List the steps involved in computing the Internal Rate of Return (IRR) and Modified Internal Rate of Return (MIRR) of an investment. XYZ Ltd is considering an investment proposal for a new item of equipment for its plant. The equipment would cost $360 000 (including installation). It is estimated that the equipment would generate positive cash flows of $120,000 in year 1, 80,000 in year2, 75,000 in year 3, 90,000 in year 4 and 100,000 in year 5, and would have a five-year useful life. The required rate of return is 10%. a. What is the IRR of this investment? b. What is the MIRR of this investment? On the basis of IRR and MIRR analysis, should the project be accepted? Give reasons for your decision. Use the Discount Rate of 8%. Question 6: List the steps involved in computing the Internal Rate of Return (IRR) and Modified Internal Rate of Return (MIRR) of an investment. XYZ Ltd is considering an investment proposal for a new item of equipment for its plant. The equipment would cost $360 000 (including installation). It is estimated that the equipment would generate positive cash flows of $120,000 in year 1, 80,000 in year2, 75,000 in year 3, 90,000 in year 4 and 100,000 in year 5, and would have a five-year useful life. The required rate of return is 10%. a. What is the IRR of this investment? b. What is the MIRR of this investment? On the basis of IRR and MIRR analysis, should the project be accepted? Give reasons for your decision. Use the Discount Rate of 8%.

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List the steps involved in computing the Internal Rate of Return IRR and Modified Internal Rate of Return MIRR of an investment 1 Determine the cash f... View the full answer