Question
(Calculating MIRR) The Dunder Muffin Company is considering purchasing a new commercial oven that costs $370,000. This new oven will produce cash inflows of $125,000
(Calculating MIRR) The Dunder Muffin Company is considering purchasing a new commercial oven that costs $370,000. This new oven will produce cash inflows of $125,000 at the end of Years 1 through 10. In addition to the cashinflows, at the end of Year 5 there will be a net cash outflow of $200,000. The company has a weighted average cost of capital of 11.6 percent. What is the MIRR of theinvestment? Would you make theinvestment? Why or whynot? Note that we discounted theproject's negative cash flows back to the present using theproject's required rate of return and then computed the MIRR from the modified cash flows.
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