The Caffeine Coffee Company uses the modified internal rate of return. The firm
ID: 2652519 • Letter: T
Question
The Caffeine Coffee Company uses the modified internal rate of return. The firm has a cost of capital of 12 percent. The project being analyzed is as follows ($34,000 investment):
What is the modified internal rate of return? An approximation from Appendix B is adequate. (You do not need to interpolate.) (Round "FV Factor" to 3 decimal places and final answer to 2 decimal places. Omit the "%" sign in your response.)
The Caffeine Coffee Company uses the modified internal rate of return. The firm has a cost of capital of 12 percent. The project being analyzed is as follows ($34,000 investment):
Use Appendix A and Appendix B. Year Cash flow 1 $ 13,000 2 12,000 3 10,000 (a)What is the modified internal rate of return? An approximation from Appendix B is adequate. (You do not need to interpolate.) (Round "FV Factor" to 3 decimal places and final answer to 2 decimal places. Omit the "%" sign in your response.)
Explanation / Answer
What is the modified internal rate of return? An approximation from Appendix B is adequate. (You do not need to interpolate.) (Round "FV Factor" to 3 decimal places and final answer to 2 decimal places. Omit the "%" sign in your response.)
FV of year 1 cash flow = 13000*FVIF(12%,3)
FV of year 1 cash flow = 13000*1.254
FV of year 1 cash flow = 16302
FV of year 2 cash flow = 12000*FVIF(12%,1)
FV of year 2 cash flow = 12000*1.12
FV of year 2 cash flow = 13440
FV of year 2 cash flow = 10000
Total FV = 16302 + 13440 +10000
Total FV = $ 39742
Investment = 34000
MIRR = (Total FV/Investment)^(1/n)
MIRR = (39742/34000)^(1/3)
MIRR = 5.34%
Answer
Modified internal rate of return = 5.34%
(a)What is the modified internal rate of return? An approximation from Appendix B is adequate. (You do not need to interpolate.) (Round "FV Factor" to 3 decimal places and final answer to 2 decimal places. Omit the "%" sign in your response.)