question archive Durango Cereal Company is considering adding two new kinds of cereal to its product line—one geared toward children and the other toward adults

Durango Cereal Company is considering adding two new kinds of cereal to its product line—one geared toward children and the other toward adults

Subject:AccountingPrice:2.86 Bought8

Durango Cereal Company is considering adding two new kinds of cereal to its product line—one geared toward children and the other toward adults. The company is currently at full capacity and will have to invest a large sum in machinery and production space. However, given the nature of cereal production, the investment in machinery will be more costly for the children's cereal (Poofy Puffs) than for the adult cereal (Filling Fiber). The expected cash flows for the two cereals are:

 

Year               Poofy Puffs               Filling Fiber

0                     −$24,890,000             −$13,500,000

1                     12,950,000                 7,230,000

2                     10,923,000                 8,100,000

3                     8,231,000                   8,629,000

4                     7,242,000                   5,238,900       

 

Management requires a minimum return of 15% in order for the project to be acceptable. The discount rate for projects of this level of risk is 10%. Management requires projects with this type of risk to have a minimum payback of 1.75 years.

 

What is the modified internal rate of return?

 

Option 1

Low Cost Option
Download this past answer in few clicks

2.86 USD

PURCHASE SOLUTION

Option 2

Custom new solution created by our subject matter experts

GET A QUOTE

rated 5 stars

Purchased 8 times

Completion Status 100%

Related Questions

assignment helpassignment helperassignment expertsassignment writing services