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Wyatt and Zachary Enterprises (WZE)uses the Modified Internal Rate of Return

question 64

Essay

Wyatt and Zachary Enterprises (WZE)uses the Modified Internal Rate of Return (MIRR)when evaluating projects.WZE's cost of capital is 9.75%.What is the MIRR of a project if the initial cost is $1,200,000 and the project will last seven years,with each year producing cash inflows of $290,000? Should WZE accept this project according to the MIRR method? Explain.

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Definitions:

Gross Earnings

The total amount of money earned by an individual or company before any deductions such as taxes or benefits.

Income Taxes

Taxes levied by a government directly on income, both earned (salaries, wages, commissions) and unearned (dividends, interest, rents).

Petty Cash Fund

A small amount of cash on hand used for minor, incidental expenses within a business or organization.

Small Purchases

Transactions involving the procurement of goods or services with relatively low financial value.

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