Question

Find the modified internal rate of return for the following annual series of cash flows: given a discounted rate of 10.50%: year 0 - 60,000$: year 1: 15,000$, Year 2: 16,000$, Year 3:17,000$ and year 4: 17,00$

Answer 1

1]	The MIRR assumes that intervening cash flows
	are reinvested at the WACC [discount rate].
	Thus, total FV of the cash inflows = 15000*1.105^3+16000*1.105^2+17000*1.105+17000 =	$            75,560
	Now all the cash inflows have been taken to t4.
2]	MIRR = (75560/60000)^(1/4)-1 =	5.93%
	Note:
	The year 4 cash flow is shown as $17,00. It is
	presumed that it is $17,000.