Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows:

Question:

Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows:
YEAR..............................................CASH FLOW
0....................................................−$1,450,000
1...........................................................465,000
2...........................................................535,000
3...........................................................445,000
4...........................................................395,000
All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are “blocked” and must be reinvested with the government for one year. The reinvestment rate for these funds is 4 percent. If Anderson uses a required return of 11 percent on this project, what are the NPV and IRR of the project? Is the IRR you calculated the MIRR of the project? Why or why not?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Corporate Finance Core Principles and Applications

ISBN: 978-1259289903

5th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

Question Posted: