63 095
Assignments Done
99%
Successfully Done
In July 2018

Answer to Question #51321 in Finance for mohammed abdu

Question #51321
Dunia Construction Co. (DCC) is considering a new inventory system that will cost
RM750,000. The system is expected to generate positive cash flows over the next
four years in the amounts of RM350,000 in year one, RM325,000 in year two,
RM150,000 in year three, and RM180,000 in year four. DCC's required rate of return
is 8%.
i. What is the net present value of this project?
ii. What is the internal rate of return of this project?
iii. What is the modified internal rate of return of this project?
Expert's answer
Cost RM750,000. RM350,000 in year one, RM325,000 in year two, RM150,000 in year three, and RM180,000 in year four. DCC's required rate of return is 8%.
i. The net present value of this project is:
NPV = -750,000 + 350,000/1.08 + 325,000/1.08^2 + 150,000/1.08^3 + 180,000/1.08^4 = 104,089.4
ii. The internal rate of return of this project is:
IRR = 15.13% - is the rate of return, for which NPV = 0.
iii. The modified internal rate of return of this project is:
MIRR = ((350,000 + 325,000 + 150,000 + 180,000)/750,000)^0.25 - 1 = 7.59%

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be first!

Leave a comment

Ask Your question

Submit
Privacy policy Terms and Conditions