Houston Inc

question 68

Multiple Choice

Houston Inc.is considering a project which involves building a new refrigerated warehouse which will cost $7,000,000 at t = 0 and which is expected to have operating cash flows of $500,000 at the end of each of the next 20 years.However, repairs which will cost $1,000,000 must be incurred at the end of the 10th year.Thus, at the end of Year 10 there will be a $500,000 operating cash inflow and an outflow of $1,000,000 for repairs.If Houston's required rate of return is 12 percent, what is the project's MIRR? (Hint: Think carefully about the MIRR equation and the treatment of cash outflows.)

• A)7.75%
• B)8.29%
• C)9.81%
• D)11.45%
• E)12.33%

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