Problem 10-11 MIRR and NPV

Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below:

Year	X		Y
0	-$5,000		-$5,000
1	1000		4,500
2	1500		1500
3	2000		1000
4	4000		500

The projects are equally risky, and their cost of capital is 13%. You must make a recommendation, and you must base it on the modified IRR (MIRR). Calculate the two projects' MIRRs. Round your answers to two decimal places. Project X % Project Y % Which project has the higher MIRR?

-Select-XY

NPV and IRR Analysis

After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that results in environmental damage. Before proceeding with the extraction, CTC must spend $900,000 for new mining equipment and pay $165,000 for its installation. The gold mined will net the firm an estimated $350,000 each year over the 5-year life of the vein. CTC's cost of capital is 20%. For the purposes of this problem, assume that the cash inflows occur at the end of the year.

What is the project's NPV? Round your answer to the nearest dollar. $ What is the project's IRR? Round your answer to two decimal places. %

Should this project be undertaken if environmental impacts were not a consideration? -Select-YesNoItem 3

How should environmental effects be considered when evaluating this, or any other, project? -Select-IIIIIIItem 4 I. Environmental effects should be ignored since they would have no effect on the project's profitability. II. Environmental effects should be treated as sunk costs. III. Environmental effects could be added by estimating penalties or any other cash outflows that might be imposed on the firm to help return the land to its previous state (if possible).