Question
You and your friends are planning to invest in a local. The options are as follows: t Library Coffee shop Drug store Electronics 0 $
You and your friends are planning to invest in a local. The options are as follows:
t | Library | Coffee shop | Drug store | Electronics |
0 | $ (600,000.00) | $ (800,000.00) | $ (800,000.00) | $ (800,000.00) |
1 | $ 135,000.00 | $ 175,000.00 | $ 200,000.00 | $ 150,000.00 |
Suppose that all options have an indefinite lifespan. The cash flows of the library, the coffee shop and the electronics store are expected to grow annually 2% on perpetuity. While the drug store cash flows will remain constant. If you decide to sell the electronics store on year 10 for $2,250,000 (plus the cash flow with growth from that period), calculate the modified rate of return (MIRR) if the opportunity cost of capital is 6.5% from now to year 5 and 5.5% onwards.
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