Consider a firm that currently has a market value of $2,000,000. The firm is considering a project with the following yearly cash flows and a required return (hurdle rate) of 12%. T=0 -1,500,000 T=1 400,000 T=2 -200,000 T=3 900,000 T=4 700,000 T=5 500,000 a) What is the NPV of the project? b) Calculate the Modified IRR (MIRR) using a 12% discount rate. c) If the firm decided to go forward with (i.e., accept) this project, what would the firm's new market value be? Explain your answer clearly and make sure to support your conclusion with the appropriate work.

MACRS Depreciation Percentages -- Half-Year Convention

PROPERTY CLASS

RECOVERY

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YEAR 3-YEAR 5-YEAR 7-YEAR 10-YEAR

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1 33.33% 20.00% 14.29% 10.00%

2 44.45 32.00 24.49 18.00

3 14.81 19.20 17.49 14.40

4 7.41 11.52 12.49 11.52

5 11.52 8.93 9.22

6 5.76 8.92 7.37

7 8.93 6.55

8 4.46 6.55

9 6.56

10 6.55

11 3.28

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Totals 100.00% 100.00% 100.00% 100.00%