Dry-Sand Company Is Considering Investing in a New Project

question 71

Multiple Choice

Dry-Sand Company is considering investing in a new project.The project will need an initial investment of $1,200,000 and will generate $600,000 (after-tax) cash flows for three years.However, at the end of the fourth year, the project will generate -$500,000 of after-tax cash flow due to dismantling costs.Calculate the MIRR (modified internal rate of return) for the project if the cost of capital is 15 percent.

• A)8.1 percent
• B)12.6 percent
• C)28.2 percent
• D)20.4 percent

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Definitions:

Hypothesis

A proposed explanation for a phenomenon, based on previous observations, that can be tested through experimentation or observation.

Objective Manner

Acting or making decisions based on unbiased criteria and facts rather than personal feelings or opinions.

Double-blind Procedure

A research method in which neither the participants nor the experimenters know which participants belong to the control group and which belong to the experimental group.

Informed Consent

A process ensuring that a participant is fully aware of all aspects of a procedure, including potential risks and benefits, before agreeing to participate.