Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please show steps to solve for MIRR (Calculating MIRR) OTR Trucking Company runs a fleet of long-haul trucks and has recently expanded into the Midwest,

Please show steps to solve for MIRR

image text in transcribed

(Calculating MIRR) OTR Trucking Company runs a fleet of long-haul trucks and has recently expanded into the Midwest, where it has decided to bulld a maintenance facility. This project will require an initial cash outlay of S21 million and will generate annual cash inflows of $3.5 million per year for Years 1 through 3. In Year 4, the project will provide a net negative cash flow of $5.8 million due to anticipated expansion of and repairs to the facility. During Years 5 through 10, the project will provide cash inflows of $1.4 million per year. a. Calculate the project's NPV and IRR where the discount rate is 11 percent. Is the project a worthwhile investment based on these two measures? Why or why not? b. Calculate the project's MIRR. Is the project a worthwhile investment based on this measure? Why or why not? a. The project's NPV where the discount rate is 11% is $ - 12.37 million. (Round to two decimal places.) The project's IRR is -8.62 %. {Round to two decimal places.) Is the project a worthwhile investment based on these two measures? Why or why not? (Select the best choice below.) A. No, the project is not worthwhile based on either measure because the IRR is less than the discount rate and the NPV is negative. OB. The project is only worthwhile based on the IRR measure because the IRR is greater than the discount rate but the NPV is negative. OC. Yes, the project is worthwhile based on both measures because the IRR is more than the discount rate and the NPV is positive. OD. The project is only worthwhile based on the NPV measure because the IRR is less than the discount rate but the NPV is positive. b. The MIRR of the project with a discount rate of 11% %. (Round to two decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Supply Chain Finance And Blockchain Technology The Case Of Reverse Securitisation

Authors: Erik Hofman, Urs Magnus Strewe, Nicola Bosia

1st Edition

3319623702, 978-3319623702

More Books

Students also viewed these Finance questions