Manheim Candles is considering a project with the following incremental cash flows. Assume a discount rate of 10%.
Year Cash Flow
0 ($20,000)
1 0
2 $30,000
3 $30,000
Calculate the project's MIRR. (Round to the nearest whole percentage.)
A) 31%
B) 47%
C) 53%
D) 61%
Project H requires an initial investment of $100,000 and produces annual cash flows of $50,000, $40,000, and $30,000. Project T requires an initial investment of $100,000 and the produces annual cash flows of $30,000, $40,000, and $50,000. The projects are mutually exclusive. The company accepts projects with payback periods of 3 years or less.
A) Project H will be accepted.
B) Project T will be accepted.
C) H and T will both be accepted.
D) Neither projected will be accepted.
A new forklift under consideration by Home Warehouse requires an initial investment of $100,000 and produces annual cash flows of $50,000, $40,000, and $30,000. Which of the following will not change if the required rate of return is increased from 10% to 12%.
A) The net present value.
B) The internal rate of return.
C) The profitability index.
D) The modified internal rate of return.
Project Ell requires an initial investment of $50,000 and the produces annual cash flows of $30,000, $25,000, and $15,000. Project Ess requires an initial investment of $60,000 and then produces annual cash flows of $25,000 per year for the next ten years. The company ranks projects by their payback periods.
A) Projects with unequal lives cannot be ranked using the payback method.
B) Ess will be ranked higher than Ell.
C) Ell and Ess will be ranked equally.
D) Ell will be ranked higher than Ess.
Which of the following series of cash flows could have more than one IRR? (Negative cash flows are in parentheses.)
A) $(XX,XXX), $X,XXX , $X,XXX, $X,XXX
B) $(XX,XXX), $X,XXX , $X,XXX, $X,XXX, $(XX,XXX)
C) $X,XXX, $X,XXX , $X,XXX, $X,XXX, $(XX,XXX)
D) $XX,XXX, $X,XXX , $X,XXX, $X,XXX
