Question

A project has an initial cost of $73,000, expected net cash inflows of $11,000 per year for 6 years, and a cost of capital of 11%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

Terminal Value of Cash Inflows :

Cash inflow Duration Rate Calculation Terminal Value

$11,000 6 years 11% 11,000 * (1.11)^6 20,574.56

$11,000 5 years 11% 11,000 * (1.11)^5 18,535.64

$11,000 4 years 11% 11,000 * (1.11)^4 16,698.77

$11,000 3 years 11% 11,000 * (1.11)^3 15,043.94

$11,000 2 years 11% 11,000 * (1.11)^2 13,553,10

$11,000 1 year    11% 11,000 * (1.11)^1 12,210.00

Total terminal Value of Cash Inflows = $96,616.02

Present Value of Cash Outflows :

Cash outflow Duration Rate Calculation Value

$73,000 0 year - - 73,000

i.e. MIRR =

i.e. MIRR = ($96,616.02/$73,000)^(1/6) -1 = 0.047822 = 4.78%