1) Mulligan, Inc. is currently considering an eight-year project that has an initial outlay or cost of $140,000. The cash inflows from its project for years 1 through 8 are the same at $35,000. Mulligan has a discount rate of 12%. Because there is a shortage of funds to finance all good projects, Mulligan wants to compute the profitability index (PI) for each project. That way Mulligan can get an idea as to which project might be a better choice. What is the PI for Mulligan's current project?
2) Berra, Inc. is currently considering an eight-year project that has an initial outlay or cost of $120,000. The future cash inflows from its project for years 1 through 8 are the same at $30,000. Berra has a discount rate of 11%. Because of capital rationing (shortage of funds for financing), Berra wants to compute the profitability index (PI) for each project. What is the PI for Berra's current project?
3) Find the Modified Internal Rate of Return (MIRR) for the following series of future cash flows, given a discount rate of 11%: Year 0: -$22,000; Year 1: $5,000; Year 2: $6,000; Year 3: $7,000; Year 4: $7,500; and, Year 5: $8,000.