0 Search this cour Ch 11: Blueprint Problems - The Basics of Capital Budgeting While the IRR's reinvestment rate assumption is the IRR, the MIRR's reinvestment rate assumption is the projects WACC As a result, the MIRR is generally a better indicator of a project's true profitability than IRR. Unlike the IRR, there can never be more than one MIRR, and the MIRR can be compared with the project's WACC when deciding to accept or reject projects. For independent projects, the NPV, IRR, and MIRR always reach the same accept/reject conclusion, so the three criteria are equally good when evaluating independent projects. If projects are mutually exclusive and they differ in size, conflicts in project acceptance on arise. In these cases, the is the best decision method because it selects the project that maximizes firm value Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects after tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 8% 0 2. 3 4 270 Project A -1,300 650 425 320 Project B -1,300 250 360 420 720 What is Project A's MIRR? Do not round intermediate calculations. Round your answer to two decimal places 9 What is Project B's MIRR? Do not round intermediate calculations. Round your answer to two decimal places If the projects were independent, which project(s) would be accepted according to the MIRR method? --Select- if the projects were mutually exclusive, which project(s) would be accepted according to the MIRR method? Select Save & Continue