question archive 1) MIRR unequal lives
1) MIRR unequal lives
Subject:BusinessPrice: Bought3
1) MIRR unequal lives. Grady Enterprises is looking at two project opportunities for a parcel of land the company currently owns. The first project is a? restaurant, and the second project is a sports facility. The projected cash flow of the restaurant is an initial cost of ?$1,520,000 with cash flows over the next six years of ?$250,000 ?(year one), ?$300,000 ?(year two), $250,000 ?(years three through? five), and ?$1,740,000 ?(year six), at which point Grady plans to sell the restaurant. The sports facility has the following cash? flows: an initial cost of ?$2,360,000 with cash flows over the next four years of ?$430,000 (years one through? three) and ?$3,380,000
?(year four), at which point Grady plans to sell the facility. The appropriate discount rate for the restaurant is 10.5?%and the appropriate discount rate for the sports facility is 12.0?%. What are the MIRRs for the Grady Enterprises? projects? What are the MIRRs when you adjust for the unequal? lives? Do the MIRR adjusted for unequal lives change the decision based on the? MIRRs? ?Hint: Take all cash flows to the same ending period as the longest project.
What is the MIRR of the restaurant when you adjust for unequal? lives?
?(Round to two decimal? places.)
2) MIRR unequal lives. Singing Fish Fine Foods has ?$1,890,000 for capital investments this year and is considering two potential projects for the funds. Project 1 is updating the? store's deli section for additional food service. The estimated?after-tax cash flow of this project is ?$580,000 per year for the next five years. Project 2 is updating the? store's wine section. The estimated annual? after-tax cash flow for this project is ?$530,000 for the next six years. The appropriate discount rate for the deli expansion is 9.7?% and the appropriate discount rate for the wine section is 9.2?%. What are the MIRRs for the Singing Fish Fine Foods? projects? What are the MIRRs when you adjust for unequal? lives? Do the MIRR adjusted for unequal lives change the decision based on? MIRRs? ?Hint: Take all cash flows to the same ending period as the longest project.
What is the MIRR adjusted for unequal lives of the deli? expansion?
?(Round to two decimal? places.)
3) NPV unequal lives. Singing Fish Fine Foods has ?$2,030,000 for capital investments this year and is considering two potential projects for the funds. Project 1 is updating the? store's deli section for additional food service. The estimated?after-tax cash flow of this project is ?$650,000 per year for the next five years. Project 2 is updating the? store's wine section. The estimated annual? after-tax cash flow for this project is ?$520,000 for the next six years. If the appropriate discount rate for the deli expansion is 9.3?% and the appropriate discount rate for the wine section is 8.9?%, use the NPV to determine which project Singing Fish should choose for the store. Adjust the NPV for unequal lives with the equivalent annual annuity. Does the decision? change?
If the appropriate discount rate for the wine section is 8.9?%,
what is the NPV of the wine? section?
