Reference no: EM132199185
The firm is evaluating a project, which has the cash flows listed in the following table. If both the discount rate and the reinvestment rate are 15%, what is the modified internal rate of return (MIRR) based on the combination approach?
Year Cash flow
0 -$290,000
1 $156,000
2 -$135,000
3 $223,000
4 $221,000
A. 6.5% B. 23.9% C. 16.2% D. 11.1%
Barred Windows LLC purchased a land for $2,000,000 four years ago. The land has been idle for a while and its current market value is $1,800,000. The effective tax rate for Barred Windows LLC is 40%. If the company decides to use this land for a new project, what value, if any, should be included in the initial cash flow of the project for this land?
The optimal capital structure has been achieved when the:
a) debt-equity ratio is equal to 1.
b) debt-equity ratio results in the lowest possible weighted average cost of capital.
c) weight of equity is equal to the weight of debt.
d) cost of equity is maximized given a pre-tax cost of debt.
e) debt-equity ratio is such that the cost of debt exceeds the cost of equity.