Capital Budgeting Discounted Payback Period & MIRR

[Trickster]

Meuc Technologies is considering a new project. The company's required rate of return is 12.0%. Theinitial investment required is $17,000. Expected cash flows over the next six years are given as follows:

Year Cash Flows ($)
1 5,000
2 15,000
3 1,000
4 45,000

3. Refer to the Capital Budgeting Narrative. Find the Discounted Payback Period for Meuc Technologies’sproject.

a) 0.80 years
b) 2.80 years
c) 0.36 years
d) 2.81 years
e) 1.80 years


4. Refer to the Capital Budgeting Narrative. Find the MIRR for Meuc Technologies’s project.

a) 49.9%
b) 34.7%
c) 43.4%
d) 12.0%
e) 39.1%

The problem I'm having with Question 3 is basically properly using the formula PV ofCF=FV/(1+k)n. This is basically a "Sample" of a Quiz which I'm using to study for my test so it pretty much already has the answer which is C. 2.81 years for #3 and c. 43.4%.

So for Question #3 after using the formula Year 1: is 4,464,2857 Year 2: 11,957,9082 Year 3: 711,7802 and Year 4: 28,498,3135 my problem is no matter what combination I try to use with this formula the answers I get do not match up to these numbers. For instance the way I've tried using the formula is 5,000/(12.0) for year 1 which doesn't come out to 4,464,2857. I've tried several other combinations but I'm just not getting the right answer which is confusing me. I'd like someone to properly break down everything for me so I can get a handle on this.

 

[Trickster]

1.12, NOT .12 ; PV = FV / (1 + i)^n ; here, i = .12
5000 / 1.12^1 = 4,464.2857 (use . not , to indicate decimal)

As far as the rest goes: your post is unclear plus difficult to read.
Stuff like "6 years" being quoted but 4 years shown...

And this: "Refer to the Capital Budgeting Narrative" ?

Please ensure your post matches the original; thank you.

Answer Key Sample QUIZ #4 (Capital Budgeting)

Capital Budgeting Narrative (Use the following information for questions referring to thenarrative):Meuc Technologies is considering a new project. The company's required rate of return is 12.0%. Theinitial investment required is $17,000. Expected cash flows over the next six years are given as follows:

Year Cash Flows ($)
1 5,000
2 15,000
3 1,000
4 5,000


Up top is the original company information and "Refer to the Capital Budgeting Narrative" just means to look at the company's information. Sorry if I was unclear, basically I just wanted a step by step break down of how to find the Discounted Payback Period for question #3 and the MIRR for #4. I've tried using the formula, but I'm having trouble because my teacher used his financial calculator to solve these and mines doesn't have the same functions as his so I'm a bit stuck on the steps needed. Sorry for being unclear before.

 

[Trickster]

1.12, NOT .12 ; PV = FV / (1 + i)^n ; here, i = .12
5000 / 1.12^1 = 4,464.2857 (use . not , to indicate decimal)

As far as the rest goes: your post is unclear plus difficult to read.
Stuff like "6 years" being quoted but 4 years shown...

And this: "Refer to the Capital Budgeting Narrative" ?

Please ensure your post matches the original; thank you.

Yes even though it says 6 years it only shows 4. I was also confused by that too.