Problem: Taylor Technologies has a target capital structure, which is 40% debt and 60% equity. The equity will be financed with retained earnings. The company's bonds have a yield to maturity of 10%. The company's stock has a beta=1.1. The risk-free rate is 6%, the market risk premium is 5%, and the tax rate is 30%. The company is considering a project with the following cash flows:
Year Project Cash Flow
|
0
|
-$50,000
|
|
1
|
$35,000
|
|
2
|
$43,000
|
|
3
|
$65,000
|
|
4
|
$-40,000
|
What is the project's modified internal rate of return (MIRR)?