chpt9:q10

MIRR unequal lives. Singing Fish Fine Foods has $2,040,000 for capital investments this year and is considering two potential projects for the funds. Project 1 is updating thestore's deli section for additional food service. The estimatedafter-tax cash flow of this project is $560,000 per year for the next five years. Project 2 is updating thestore's wine section. The estimated annualafter-tax cash flow for this project is $540,000 for the next six years. The appropriate discount rate for the deli expansion is 9.4% and the appropriate discount rate for the wine section is 9.2%.

What are the MIRRs for the Singing Fish Fine Foodsprojects?

What are the MIRRs when you adjust for unequallives?

Do the MIRR adjusted for unequal lives change the decision based onMIRRs?

Hint: Take all cash flows to the same ending period as the longest project.