0
Why do you need to use MIRR to solve the problem non conventional cash flow?
Wiki User
∙ 12y ago
Because IRR can give you multiple answers due to changing signs of annual cash streams
Wiki User
∙ 12y ago
Add your answer:
Earn +20 pts
What is difference between a conventional statement of cash flows and free cash flows?
Answer:The cash flow statement gives a breakdown in operating, investing and financing activities, which add up to the change in cash over the period. Free cash flow is the sum of operating cash flow and investing cash flow. This is generally positive for a 'cash cow' (operating cash flows exceeding the investments), and negative for a growth firm (investments exceeding the cash generated by operations).
Sample problem about cash and cash equivalents?
This is a great way to figure out how to keep track of your assets. You can find sample problems of this online.
If a project with conventional cash flows has a profitability index equal to 1.0 the project you will pay back during the life of the project II will have an internal rate of return that equals the?
required return
What are the different methods of estimating working capital requirement of a firm?
There are two main methods of estimating working capital within a firm. These include the conventional method which measures cash flow, and the concept of operating cycle.
Where is decrease in short-term investments placed in cash flow statement?
A short term investment isn't always placed in a cash flow statement. When you are looking at a problem for a cash flow statement, and the additional information section says something about selling a short term investment, then the cash received from the investment is placed in the operating activities section. But if you are just looking at the balance sheet, see a decrease in the short term investments account, but no additional information is given about STI's, then you don't place the decrease anywhere. It also depends on if you are doing an indirect cash flow statement or a direct cash flow statement.
How do you calculate MIRR?
MIRR=(sqrt(FVCF/I)^n)-1 MIRR - modified internal rate of return FVCF - future value of a cash flow I - Investment n - number of periods of the cash flow
Why is the IRR not the MIRR the industry standard rate of return?
The IRR assumes all cash flows are reinvested at the IRR. All you need are the property cash flows and the initial outlay to solve the equation. So, it is a simple and objective calculation. For reference, the calculation is as follows: NPV = 0 = CF0/(1+IRR)^0 + CF1/(1+IRR)^1 + ... + CFn/(1+IRR)^n The MIRR assumes that positive cash flows are reinvested at a reinvestment rate. MIRR also assumes that negative cash flows are financed by the company at a finance rate. For reference the calculation is as follows: (( NPV of positive cash flows at reinvestment rate ) / ( NPV of negative cash flows at finance rate ))^(1/(n-1) - 1 This makes MIRR unsuitable as an industry standard. First, different firms have different reinvestment rates and different finance rates. So, MIRR cannot be used to compare investments purchased or sold by different companies. Second, the rates will change over time, thus making it impossible to compare MIRR's at different intervals. MIRR is best used internally by a particular firm choosing between several investments at a given time.
A project has an initial cost of 52125 expected net cash inflows of 12000 per year for 8 years and a cost of capital of 12 percent What is the projects MIRR and What is the projects PI?
The MIRR of this project is 13.89% and the PI is 1.13.
What is conventional projects?
A project with a negative initial cash flow(cash out flow),which is expected to followed by one or more future positive cash flows(cash inflows) is called conventional project.
How did the AAA solve a fundamental problem of the Depression?
the aaa gave cash benefits to farmers to help them get out of debt. hope that helps
What is conventional and unconventional cash flow?
Unconventional cash flow occurs when money is spent and received at sporadic time increments and amounts over the course of a project. Conventional cash flow has a steady pattern of receivables and payables.
In what sense is a reinvestment rate assumption embodied in the npv irr and mirr methods what is the assumed reinvestment rate of each method?
IRR assumes that all cash flows are reinvested at the project's rate of return, seldom a defensible assumption. Since NPV discounts future cash flows at the investor's cost of capital, it more accurately represents the value of a project. It assumes that cash flows are reinvested at the cost of capital. This is a good assumption so long as the financing can be repaid in stages so as to reduce interest or equity cost. MIRR enables a project to be described with the simplicity of a percentage rate of return, as with IRR, but does not assume that cash flows can be effectively reinvested in the project at the calculated rate of return. Instead, cash flows are assumed to be reinvested at any given rate, such as a bank interest rate.
How do you use excel function for Modified Internal Rate of Return?
The MIRR function returns the modified internal rate of return for a series of cash flows. The internal rate of return is calculated by using both the cost of the investment and the interest received by reinvesting the cash. The cash flows must occur at regular intervals, but do not have to be the same amounts for each interval.MIRR(range,finance_rate,reinvestment_rate)range = range of cells that represent the series of cash flowsfinance_rate = interest rate that you pay on the cash flow amountsreinvestment_rate = interest rate that you receive on the cash flow amounts as they are reinvested
What was the problem with growing cash crops?
a huge, cheap, work force was needed to grow it.NovaNETThere is no problem with growing cash crops that I am aware of. Hay is a cash crop I grow.
How to solve the proof of cash?
Proof of cash usually requires a bank statement that shows liquid assets. Actual physical cash may have to be presented and counted by the requester.
The problem growing cash crops such as tobacco was that?
A problem with cash crops is that they are labor-intensive and not economical without have enough labor to attend to them. When there are many workers to plant and harvest cash crops, then there is more profit.
Is the idea of recycling ink cartridges for cash a myth?
Nope! You can do it! Go to office max and they will give you the cash back! The only problem? The only problem is that you can only use the cash back at OfficeMax the store!
