Explore BrainMass

Explore BrainMass

    Non normal cash flows, MIRR; Jones Construction IRR

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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?

    © BrainMass Inc. brainmass.com June 4, 2020, 1:38 am ad1c9bdddf
    https://brainmass.com/business/modified-internal-rate-of-return/non-normal-cash-flows-mirr-jones-construction-irr-411766

    Solution Preview

    Please see the attached file

    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

    ADVERTISEMENT