IRR and MIRR and Discounted Payback
The new project has a cost of $52,125, its expected net cash inflows are $12,000 per year for 8 years, and its cost of capital and its cost of capital is 12 percent.
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What is the project's IRR and MIRR and Discounted Payback?
The internal rate of return is defined as that discount rate which equates the present value of a project's expected cash inflows to the present value of the project's costs:
PV(Inflows) = PV(Investment costs), or the rate which forces the NPV to equal zero.
NPV = sum of CFt where CF is the cash flow
(1 + IRR)n IRR is the internal rate of return
n is the period.
NPV = -52,125 + 12,000 + ...
This solution is comprised of a detailed explanation to answer what is the project's IRR and MIRR and Discounted Payback.
Calculate NPV, IRR, MIRR and Evaluate Planned Acquisition
Problem 1: Tundra Toys wants to acquire another similar company. It estimates
that net cash flows for the acquired company will be $800,000 per year for 10 years.
The cost is $5,000,000. The company's cost of capital is 12 %.
a. Calculate NPV, IRR, and MIRR.
b. Should the company go ahead with the project based on your calculations? Why or why not?
c. What factors might change your recommendation?View Full Posting Details