Now suppose we're looking at a project that pays $10m in free cash flow every year for 10 years; has an initial cost of $50; and a terminal cost $20m in the final year.
a) Calculate the internal Rate of Return (IRR) for this project, and comment on whether you think it will create value for the company.
b) Calculate the Modified IRR (MIRR) for this project using a discount rate of 10%, and comment on why we might choose to use this calculation instead of a regular IRR.
c) Why do we perform sensitivity analysis and/or scenario analysis when we analyze projects like this? Explain how it helps us make more informed decisions.