Share
Explore BrainMass

# Non normal cash flows, MIRR; Jones Construction IRR

XYZ is analyzing a project with the following cash flows:

0 years=-\$3000
1 year=\$1200
2 year=-\$400
3 year=\$1800
4 year=\$1800

1) The project has normal or non-normal cash flows?
XYZ WACC is 9.6% and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR)

2) XYZ managers select projects based on the MIRR criterion, should the accept the independent project?

Jones Construction is analyzing a highly profitable project with the following cash flows:

0 years=-\$8000
1year=\$4500
2 year=\$4500
3 year=\$3000
4 year=\$3000

1) The project has the same risk as the firm's average project. Calculate the project's IRR.

2) Some managers think the expected rate of return on the project will be overstated if they use the IRR method. They think that intermediate cash flows received from the project can only be reinvested at the firm's WACC of 20.0%. Calculate this project's MIRR?

#### Solution Preview

MIRR
XYZ is analyzing a project with the following cash flows:

0 years=-\$3000
1 year=\$1200
2 year=-\$400
3 year=\$1800
4 year=\$1800

1) The project has normal or non-normal cash flows?
XYZ WACC is 9.6% and the project has ...

#### Solution Summary

Solution discusses Non normal cash flows, MIRR; Jones Construction IRR

\$2.19