Question
Crochet Co. is considering purchasing a new machine, which would require an initial outlay of $350,000 and produce expected cash flows in years 13 of
Crochet Co. is considering purchasing a new machine, which would require an initial outlay of $350,000 and produce expected cash flows in years 13 of $90,000 per year. The machine requires a maintenance in year 5 to support future operations, and the maintenance costs $150,000. You can sell the machine for $500,000 in year 6.
You have determined that the current after-tax cost of the firm's capital (required rate of return) for each source of financing is as follows:
After-tax cost of long-term debt | 9% |
Cost of common stock | 15% |
3. What is the MIRR of this project?
%
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