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Math Help - Mirr

  1. #1
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    Mirr

    does anyone know how to calculate this problem using excel....5. Star Industries owns and operates landfills for several municipalities throughout the East Coast. Star typically contracts with the municipality to provide landfill services for a period of 20 years. It typically costs $10 million to construct the new landfill results initially. Maintenance is generally required on the landfill at the end of year 10 which results in a cash outflow that year of an additional $5 million. This change in sign on the stream of cash flows over the 20-year contract period introduces the potential for multiple IRRs, so Starís management has decided to use the MIRR to evaluate new landfill investment contracts. Plus, Star doesnít like the idea that the IRR is the assumed reinvestment rate when using this methodology. The annual cash inflows to Star begin in year 1 and extend through year 20 and are estimated to equal $3 million (note that this does not reflect the cost of maintenance in year 10). Star uses a 10% discount rate to evaluate its new projects.
    a. What are the projectís NPV and MIRR? (I suggest using Excel to do this).
    b. Is this a good investment opportunity for Star Industries? Why or why not?
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  2. #2
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    Quote Originally Posted by johnkw87 View Post
    does anyone know how to calculate this problem using excel....5. Star Industries owns and operates landfills for several municipalities throughout the East Coast. Star typically contracts with the municipality to provide landfill services for a period of 20 years. It typically costs $10 million to construct the new landfill results initially. Maintenance is generally required on the landfill at the end of year 10 which results in a cash outflow that year of an additional $5 million. This change in sign on the stream of cash flows over the 20-year contract period introduces the potential for multiple IRRs, so Starís management has decided to use the MIRR to evaluate new landfill investment contracts. Plus, Star doesnít like the idea that the IRR is the assumed reinvestment rate when using this methodology. The annual cash inflows to Star begin in year 1 and extend through year 20 and are estimated to equal $3 million (note that this does not reflect the cost of maintenance in year 10). Star uses a 10% discount rate to evaluate its new projects.
    a. What are the projectís NPV and MIRR? (I suggest using Excel to do this).
    b. Is this a good investment opportunity for Star Industries? Why or why not?
    I assume that the "I" in the highlighted text is your instructor .... In which case, this appears to be part of an assignment that counts towards your final grade. plese read the forum rules stuck at the top of every subforum regarding MHF policy on that sort of question.

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