FM11 26 - CF = -22500, CF 1 = 6250, N j = 2, CF 3 = 17250,...

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Answers and Solutions: 11 - 26 Step 3: Calculate MIRR B as follows: Enter N = 4, PV = -25000000, PMT = 0, and FV = 53520000 to solve for I = 20.96%. According to the MIRR approach, if the 2 projects were mutually exclusive, Project A would be chosen because it has the higher MIRR. This is consistent with the NPV approach. 11-22 a. NPV of termination after Year t: NPV 0 = -$22,500 + $22,500 = 0. Using a financial calculator, input the following: CF 0 = -22500, CF 1 = 23750, and I = 10 to solve for NPV 1 = -$909.09 -$909. Using a financial calculator, input the following: CF 0 = -22500, CF 1 = 6250, CF 2 = 20250, and I = 10 to solve for NPV 2 = -$82.64 -$83. Using a financial calculator, input the following:
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Unformatted text preview: CF = -22500, CF 1 = 6250, N j = 2, CF 3 = 17250, and I = 10 to solve for NPV 3 = $1,307.29 $1,307. Using a financial calculator, input the following: CF = -22500, CF 1 = 6250, N j = 3, CF 4 = 11250, and I = 10 to solve for NPV 4 = $726.73 $727. Using a financial calculator, input the following: CF = -22500, CF 1 = 6250, N j = 5, and I = 10 to solve for NPV 5 = $1,192.42 $1,192. The firm should operate the truck for 3 years, NPV 3 = $1,307. b. No. Salvage possibilities could only raise NPV and IRR. The value of the firm is maximized by terminating the project after Year 3....
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