An investor is considering a project that will generate $900,000 per year for four years. In addition to upfront costs, at the completion of the project at the end of the fifth year there will be shut-down costs of $400,000. If the cost of capital is 4.4%, based on the MIRR, at what upfront costs does this project cease to be worthwhile?
A) $2.62 million
B) $2.91 million
C) $3.21 million
D) $3.50 million

Question

Quizplus · Accepted Answer

B) Bring all negative cash flows to time 0;
thus, PV shut-down 11ea84dc_f555_bdd0_9a63_0f474a9ab8d1_TB1316_11_TB1316_11 FV positive cash flows at time 11ea84dc_f555_e4e1_9a63_b11e5cd96131_TB1316_11_TB1316_11 PV of positive cash flows at time 0 = $3,139,085; 11ea84dc_f555_e4e2_9a63_2b673948466a_TB1316_11_TB1316_11

An Investor Is Considering a Project That Will Generate $900,000