Question
(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
(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 $21 million and will generate annual cash inflows of $3.8 million per year for Years 1 through 3. In Year 4, the project will provide a net negative cash flow of $4.8 million due to anticipated expansion of and repairs to the facility. During Years 5 through 10, the project will provide cash inflows of $2.4 million per year.
A. Calculate the project's NPV and IRR where the discount rate is 11.4 percent. Is the project a worthwhile investment based on these two measures? Why or why not? (round to 2 decimal places)
B. Calculate the project's MIRR. Is the project a worthwhile investment based on this measure? Why or why not? (round to 2 decimal places)
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