NPV AND TRR A store has 5 years remaining on its lease in a mall, Rent is $2,100 per month, 60 payments remain, and the next payment is due in 1 month. The mall's owner plans to sell the property in a year and wants rent at that time to be high so that the property will appear more valuable. Therefore, the store has been offered a great deal owner's words) on a new 5-year lease. The new lease calls for no rent for 9 months, then payments of $2,700 per month for the next 51 months. The lease cannot be broken, and the store's WACCH 124 Cor 1% per month). .. Should the new lease be accepted? (Hint: Be sure to use 1% per month -Select- bit the store owner decided to bargain with the mall's owner over the new lease payment, what new lease payment would make the store owner indifferent between the new and old leases? (Hint: Find PV of the old lease's original costatt 9, then treat this as the PV of a 51 period annuity whose payments represent the rent during months 10 to 60.) Round your answer to the nearest cent. Do not round your intermediate calculations, The store owner is not sure of the 12% WACC-it could be higher or lower At what nominal WACC would the store owner be indifferent between the two leases? (Hint: Calculate the differences between the two payment streams; then find its IRR.) Round your answer to two decimal places. Do not round your intermediate calculations, MULTIPLE IRRS AND MIRR A mining company is deciding whether to open a strip mine, which costs $2.5 million Cash inflows of $13.5 million would occur at the end of Year 1. The land must be returned to natural state at a cost of $12 million, payable at the end of Year 2 a. Plot the project's NPV profile A B MS Doll IM De M 05 1 100 200 300 400 WACC) 100 400 WACCON 100 300 TO WACCINI D 25 16 DON 05 100 200 300 40 WACCUS The correct sketch is Select b. Shodid the project be accepted it WACC = 10%? -Select- Should the project be accepted WACC = 2096? Select ob 25 16 0.5 05 . 100 200 300 400 WACC) The correct sketch is Select b. Should the project be accepted W WACC + 10%? Select Should the project be accepted it wacc - 20%? Select c. Think of some other capital budgeting situations in which negative cash flows during or at the end of the project's life might lead to multiple IRRs. The input in the box below will not be graded, but may be reviewed and considered by your instructor d. What is the project's MIRRO WACC - 10%7 Round your answer to two decimal places. Do not round your intermediate calculation, What is the project's MIRR at WACC - 20%? Round your answer to two decimal places. Do not round your intermediate calculations Does MIRR lead to the same accept reject decision for this project as the NPV method? Select Does the MIRR method always lead to the same accept/reject decision as NPV (Hint: Consider mutually exclusive projects that differ in size)
