11.15b (Calculating MIRR) OTR Trucking runs afleet of long-haul trucks and has recentlyexpanded into the Midwest, where it has decidedto build a maintenance facility. This project willrequire an initial cash outlay of $20 million and willgenerate annual cash inflows of $4.5 million peryear for Years 1 through 3. In Year 4, the projectwill provide a net negative cash flow of $5,000,000due to anticipated expansion of and repairs to thefacility. During Years 5 through 10, the project willprovide cash inflows of $2 million per year. b.Calculate the project's MIRR. Is the project aworthwhile investment based on this measure?Why or why not? NOT EXCEL IN FOMULA

Step 1:let's calculate the Modified Internal Rate of Return (MIRR) for OTR Trucking's maintenance…

Answered: 11.15b (Calculating MIRR) OTR Trucking…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 12P

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The Sisyphean Company is planning on investing in a new project. This will involve the purchase of some new machinery costing $400,000. The Sisyphean Company expects cash inflows from this project as detailed below: Year 1 $169,377 19% 15% The appropriate discount rate for this project is 17%. The internal rate of return (IRR) for this project is closest to: 25% Year 2 $169,377 Ⓒ29% Year 3 $169,377 Year 4 $169,377
(Calculating MIRR) OTR Trucking Company runs a fleet of long-haul trucks and has recently expanded into the Midwest, where it has decided to build a maintenance facility. This project will require an initial cash outlay of $18.5 million and will generate annual cash inflows of $4.2 million per year for Years 1 through 3. In Year 4, the project will provide a net negative cash flow of $5.5 million due to anticipated expansion of and repairs to the facility. During Years 5 through 10, the project will provide cash inflows of $1.4 million per year. a. Calculate the project's NPV and IRR where the discount rate is 11 percent. Is the project a worthwhile investment based on these two measures? Why or why not? b. Calculate the project's MIRR. Is the project a worthwhile investment based on this measure? Why or why not?
Calculating MIRR OTR Trucking company runs a fleet of long-haul trucks and has recently expanded into the Midwest, where it has decided to build a maintenance facility. This project will require an initial cash outlay of 20.5 million and will generate annual cash flows of $3.5 million per year for years 1 through 3. In year 4, the project will provide a net negative cash flow of $5.8 million due to anticipated expansion of and repairs to the facility. During years 5 through 10 the project will provide cash inflows of $1.4 million per year calculate the projects NPV and IRR where the discount rate is 11 percent is the project a worthwhile investment based on these two measures? Why or why not? calculate the projects MIRR is the project a worthwhile investment based on this measure? Why or why not?
5. Bullock Gold Mining is evaluating a new gold mine in South Dakota. All of the analysis has been done and the CFO has forecast some of the relevant cash flow information. If BGM opens the mine, it will cost S635 million today (Time 0) and it will have a cash outflow nine years from today (Time 9) of $45 million in costs related to closing the mine and reclaiming the area around. Of the initial costs, BGM will depreciate $500 million over 8 years using straight line method. Expected earnings before taxes for the eight years of operation are shown below. BGM has a required rate of return for all of its gold mines of 12%. Earnings before taxes (in $1,000s): 0 1 37,857.14 60,714.29 96,428.57 157,857.1 203,571.4 132,142.9 117,857.1 85,000.00 2 3 4 6 7 8 a) Find the relevant cash flows for each of the relevant periods (Time 0 – Time 9). Operating cash flows for Time 1-8 should include: - Earnings before taxes Taxes (30%) Net Income Depreciation Free Cash flows b) Calculate the NPV, IRR and…
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A project has the following cash flows: 0 1 2 3 4 5 -$600 $205 -$X $189 $380 $499 This project requires two outflows at Years 0 and 2, but the remaining cash flows are positive. Its WACC is 12%, and its MIRR is 14.72%. What is the Year 2 cash outflow? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent. $ ___
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