FIN 5425 Quiz 10. Capital Budgeting
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4 Terms
Imagine a project with an infinite life. You have projected cash flows up to year five and want to find the contribution of year 6+ cash flows to the NPV. Year 5 cash flow is 1100, long-run growth rate is 0.025 and WACC after year 5 is 0.09, and up to year 5 0.095.
17346
11274
11019
17346
Compute MIRR for a project with the following cash flows.
CF0 -1000
CF1 800 and grows at 3 percent annually to year 5.
WACC 0.067 and reinvestment rate is 0.08.
38%
40%
36%
38%
You compute an IRR for a project - it generates two solutions. Whats the next step?
Pick the more reasonable of the two.
Compute the MIRR.
Compute the NPV.
Use MIRR or NPV.
Use MIRR or NPV.
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