Question: You are considering the following three projects. A & B are mutually exclusive while C is independent. Following are their expected cash flows year project
You are considering the following three projects. A & B are mutually exclusive while C is independent.
Following are their expected cash flows
| year | project A | Project B | Project C |
| 0 | -60,000.00 | -40,000.00 | -20,000.00 |
| 1 | 0 | 40,000.00 | 35,000.00 |
| 2 | 82,000.00 | 40,000.00 | 30,000.00 |
| 3 | 60,000.00 | 20,000.00 | 2,000.00 |
| 4 | 20,000.00 | 10,000.00 | -40,000.00 |
Assuming no capitol rationing a required rate of return (cost of capital) of 12% for all three projects.
4) Using cost of capital, as a financing and reinvestment rate, calculate MIRR for each project.
5) If A&B profiles cross, calculate the exact crossover point between project A & B.
6) Which of the three projects, if any, should be accepted and why?
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
Study Help