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) Taylor Technologies has a target capital structure, which is 40% debt and 60% equity. The equity will be financed with retained earnings. The...

2.) Taylor Technologies has a target capital structure, which is 40% debt and 60% equity. The equity will be financed with retained earnings. The company's bonds have a yield to maturity of 10%. The company's stock has a beta=1.1. The risk-free rate is 6%, the market risk premium is 5%, and the tax rate is 30%. The company is considering a project with the following cash flows:
(see chart in the attached file)
What is the project's modified internal rate of return (MIRR)?

2.) Taylor Technologies has a target capital structure, which is 40%
debt and 60% equity. The equity will be financed with retained earnings.
The company’s bonds have a yield to maturity of 10%. The company’s
stock has a beta=1.1. The risk-free rate is 6%, the market risk premium
is 5%, and the tax rate is 30%. The company is considering a project
with the following cash flows:
Year Project Cash Flow
0 -$50,000
1 $35,000
2 $43,000
3 $65,000
4 $-40,000
What is the project’s modified internal rate of return (MIRR)?

This question was asked on May 16, 2010.

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