Accepting or rejecting project by comparing mirr to the wacc

Assignment Help Financial Management

Reference no: EM132053592

When NPV and IRR rules result in a conflicting decision regarding acceptance of a project managers could use the MIRR.

It assumes reinvestment of projects' cash flows at the WACC, so it produces results consistent with NPV method.

Let's try to find the MIRR for the project with the following cash flows:

Initial cost of -800 at time zero, CF1 = 400, CF 2 = 570, CF3 = -130.

Here we have two negative cash flows and two positive cash flows.

Step 1: find PV of two costs at the discount rate = WACC of 7%;

Step 2 : find FV of two inflows at 7%;

Step 3: find the discount rate that makes PV from step 1 equal to FV from step 2. That is MIRR.

Make a decision on accepting or rejecting the project by comparing MIRR to the WACC.

Can someone please show me how to get the answer using a financial calculator for example C0= etc..

Reference no: EM132053592

Questions Cloud

What is the expected return on stock : What is the expected return on stock A if the expected return on the market is 10% and the risk-free rate is 4%? Asset A has a beta of 1.2.

Determine the value of c : Let Z be a standard normal random variable. Determine the value of c

Why is decentralization becoming more common : Why is decentralization becoming more common in contemporary organizations? Why does it work so well?

What is the height of distribution : What is the height of this distribution? What is the probability that a randomly selected can contain more than 12.01 ounces of fluid?

Accepting or rejecting project by comparing mirr to the wacc : find the discount rate that makes PV from step 1 equal to FV from step 2. Make a decision on accepting or rejecting project by comparing MIRR to the WACC.

How integrated marketing communications can add value : Marketing Information Systems. Student can identify at least three sources of input to a marketing information system for a product or service offering.

Improvement in productivity of warehousing : How might there be opportunities for improvement in productivity of warehousing? What are some reasons why new warehouses might be prohibitively expensive?

Concepts of mean-standard deviations of probability : How does the concepts of mean and standard deviations of probability distributions play a role in managerial decision-making?

What is the lower limit of the confidence interval : What is the lower limit of the 95% confidence interval? What is the upper limit of the 95% confidence interval?

User Account

All Pages