Nast IncIs Considering Projects S and L,whose Cash Flows Are Shown

question 28

Multiple Choice

Nast Inc.is considering Projects S and L,whose cash flows are shown below.These projects are mutually exclusive,equally risky,and not repeatable.If the decision is made by choosing the project with the higher MIRR rather than the one with the higher NPV,how much value will be forgone? Note that under some conditions choosing projects on the basis of the MIRR will cause $0.00 value to be lost. $\text { WACC: } \quad 10.75 \%$
$\begin{array}{llllll}&0&1&2&3&4\\\hline\mathrm{CF}_{\mathrm{S}} & -\$ 1,100 & \$ 375 & \$ 375 & \$ 375 & \$ 375 \\\mathrm{CF}_{\mathrm{L}} & -\$ 2,200 & \$ 725 & \$ 725 & \$ 725 & \$ 725\end{array}$

• A) $6.49
• B) $9.40
• C) $0.00
• D) $7.66
• E) $6.66

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Definitions:

Mediation

Conflict resolution procedure in which a mediator hears the views of both sides and facilitates the negotiation process but has no formal authority to dictate a resolution.

Conflict Resolution

Conflict resolution involves the process of resolving a dispute or disagreement between parties by addressing the root causes and finding an amicable solution that satisfies all parties involved.

Formal

Pertains to actions, procedures, or appearances that are done in accordance with established or prescribed rules.

Cooperation

The act of working together towards a common goal or interest, often involving shared resources or efforts.