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# FM11 22 - PV costs = \$4,400,000 \$25,000,000(1.08 2 =...

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The table above was constructed using a financial calculator with the following inputs: CF 0 = -4400000, CF 1 = 27700000, CF 2 = -25000000, and I = discount rate to solve for the NPV. b. If r = 8%, reject the project since NPV < 0. But if r = 14%, accept the project because NPV > 0. c. Other possible projects with multiple rates of return could be nuclear power plants where disposal of radioactive wastes is required at the end of the project's life, or leveraged leases where the borrowed funds are repaid at the end of the lease life. (See Chapter 20 for more information on leases.) d. Here is the MIRR for the project when r = 8%:
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Unformatted text preview: PV costs = \$4,400,000 + \$25,000,000/(1.08) 2 = \$25,833,470.51. TV inflows = \$27,700,000(1.08) 1 = \$29,916,000.00. Now, MIRR is that discount rate which forces the PV of the TV of \$29,916,000 over 2 years to equal \$25,833,470.51: \$25,833,470.51 = \$29,916,000(PVIF r,2 ). Inputs 2 -25833470.51 0 29916000 I PV PMT FV N Output = 7.61 MIRR = 7.61%. At r = 14%, Inputs 2 -23636688.21 0 31578000 I PV PMT FV N Output = 15.58 MIRR = 15.58%. PV costs = \$4,400,000 + \$25,000,000/(1.14) 2 = \$23,636,688.21. TV inflows = \$27,700,000(1.14) 1 = \$31,578,000. Answers and Solutions: 11 - 22...
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