# Finance- Find the Modified Internal Rate of Return (MIRR) for the following annual series of cash flows

| July 29, 2018

1) Find the Modified Internal Rate of Return (MIRR) for the following annual series of cash flows, given a discount rate of 10.50%: Year 0: -\$75,000; Year 1: \$15,000; Year 2: \$16,000; Year 3: \$17,000; Year 4: \$17,500; and, Year 5: \$18,000.2) Pie, Inc. is considering an eight-year project that has an initial after-tax outlay or after-tax cost of \$180,000. The future after-tax cash inflows from its project for years 1 through 8 are the same at \$38,000. Pie uses the net present value method and has a discount rate of 11.50%. Calculate the Net Present Value of the project. Will Pie accept the project?3) Consider the following four-year project. The initial outlay or cost is \$180,000. The respective cash inflows for years 1, 2, 3 and 4 are: \$100,000, \$80,000, \$80,000 and \$20,000. What is the discounted payback period if the discount rate is 11%?4) Bald Eagle Co. purchases an asset for \$50,000. This asset qualifies as a five-year recovery asset under MACRS, with the fixed depreciation percentages as follows: year 1 = 20.00%; year 2 = 32.00%; year 3 = 19.20%; year 4 = 11.52%. Bald Eagle has a tax rate of 35%. If the asset is sold at the end of four years for \$5,000, what is the after-tax cash flow from disposal?5) KKOL, Inc. has just issued a 10-year \$1,000.00 par value, 10% annual coupon bond for a net price of \$964.00. The tax rate is 30%. What is the after-tax cost of debt financing? Use a financial calculator or Excel to determine your answer.6) The following information comes from the Galaxy Way Construction balance sheet. The value of common stock is \$10,000, retained earnings equals \$7,000, total common equity equals \$17,000, preferred stock has a value of \$3,000, and long-term debt totals \$15,000. If the cost of debt is 8.00%, preferred stock has a cost of 10.00%, common stock has a cost of 12.00%, and the firm has a corporate tax rate of 30%, calculate the firm’s WACC adjusted for taxes.7) Use the dividend growth model to determine the required rate of return for equity. Your firm has just paid a dividend of \$1.50 per share, has a recent price of \$31.82 per share, and anticipates a growth rate in dividends of 4.00% per year for the foreseeable future.8) The following market information was gathered for the Blender Corporation. The firm has 1,000 bonds outstanding, each selling for \$1,100.00 with a required rate of return of 8.00%. Blenders has 5,000 shares of preferred stock outstanding, selling for \$40.00 per share and 50,000 shares of common stock outstanding, selling for \$18.00 per share. If the preferred stock has a required rate of return of 11.00% and the common stock requires a 14.00% return, and the firm has a corporate tax rate of 30%, then calculate the firm’s WACC adjusted for taxes.9) T-short Unlimited, Inc., an on line retailer of t-shirts, orders 100,000 t-shirts per year from its manufacturer. T-short Unlimited plans on ordering t-shirts 12 times over the next year. T-short Unlimited receives the same number of t-shirts each time it orders. The carrying cost is \$0.10 per shirt per year. The order cost is \$500 per order. What is the annual ordering cost of the t-shirt inventory (rounded to the nearest dollar)? 32) ______10) Canada Forest Mills Inc. has credit terms of 2/10 net 60. Customers should take the discount and pay in 10 days if they CANNOT earn more than ________ (APR) or ________ (EAR) on their investments.11) Plum Electronics Inc. has a profitability ratio of 0.14, an asset turnover ratio of 1.7, a debt to equity ratio of 0.60 and a total asset to equity ratio of 1.60. What is the firm’s ROE?Consider the information below from a firm’s balance sheet for 2011 and 2012. All the work has to be shown!Current Assets 2012 2011 ChangeCash and Equivalents \$1,561 \$1,800 -\$ 239Short-Term Investments \$1,052 \$3,010 -\$ 1,958Accounts Receivable \$3,616 \$3,129 \$ 487Inventories \$1,816 \$1,543 \$ 273Other Current Assets \$ 707 \$ 601 \$ 106Total Current Assets \$8,752 \$10,083 -\$1,331Current LiabilitiesAccounts Payable \$5,173 \$5,111 \$ 62Short-Term Debt \$ 288 \$ 277 \$ 11Other Current Liabilities \$1,401 \$1,098 \$ 303Total Current Liabilities \$6,862 \$6,486 \$ 37612) Assuming the Operating Cash Flows (OCF) are \$7,155 and the Net Capital Spending (NCS) is \$2,372, what is the Cash Flow from Assets?

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