Does MIRR solve all of IRR's shortcomings?
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1: Investment scenarios:
Assume you are working as an investment financial officer for your company: Make up an investment opportunity for your company and discuss key sensitivities (risks) and possible scenarios. Discuss a few risks or key assumptions and the effects of possible changes in their values
2: NPV versus IRR
Discuss some of the factors that would cause you to rely more on either NPV or IRR. Does MIRR solve all of IRR's shortcomings?
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Solution Summary
Over 1000 words and an Excel spreadsheet argue this in investment scenarios and NPC v. IRR.
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Q1 Assume you are working as an investment financial officer for your company: Make up an investment opportunity for your company and discuss key sensitivities (risks) and possible scenarios. Discuss a few risks or key assumptions and the effects of possible changes in their values
Discussion of Basic concepts
The investment decisions of a firm are generally known as the capital budgeting, or capital expenditure decisions. The firm's investment decisions would generally include expansion, acquisition, modernization and replacement of the long-term assets. Sale of a division or business (divestment) is also as an investment decision.
Let us take the example of Haemonetics Corporation which is engaged in developing and manufacturing technology, which helps blood and plasma collectors, hospitals and hospital service providers. The Company ensures a safe and adequate blood supply and that assists blood banks and hospitals operate efficiently and in compliance with regulatory requirements. Haemonetics is also engaged in manufacturing automated systems and single use consumables used in blood donation, blood processing and surgical salvage of blood. The Company also develops associated data management technology. The Company's operations are in the United States, Europe, Japan and other parts of Asia.
New project that requires an investment:
1. Setting up in house unit in India for data management and technology research.
This is related to the current activities, but shifting data management and technology research activities in India will provide necessary cost and quality advantage to the company. This is because India has emerged as a research and knowledge hub of the ...
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