Silverman Co

question 64

Multiple Choice

Silverman Co. 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.

• A) $32.12
• B) $35.33
• C) $38.87
• D) $40.15
• E) $42.16

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Definitions:

Cost Of Debt

The return that lenders require on the firm’s debt.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset evenly across its useful life.

Resale Value

The estimated amount for which an asset can be sold at the end of its useful life, considering factors like market demand and the asset's remaining utility.

Net Operating Losses

Financial losses that occur when a company's operating expenses exceed its revenues, which can be applied to reduce taxable income.