Question

Project 1 and Project 2 have the cash-flows given in the table below. WACC = 15.00%...

Project 1 and Project 2 have the cash-flows given in the table below.

WACC = 15.00%
Project
Period project 1 project 2
0 ($50.00) ($75.00)
1 $10.00 $10.00
2 $10.00 $18.00
3 $20.00 $20.00
4 $50.00 $22.00
5 $24.00
6 $26.00

What is the MIRR for project 2?

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Homework Answers

Answer #1
cash inflow Duration rate working terminal value
10 5 15 =(10 x 1.155) = 20.1
18 4 15 =(18 x 1.154) = 18 x 1.75 = 31.5
20 3 15 =(20 x 1.153) = 20 x 1.52 = 30.
22 2 15 =(22 x 1.152) = 22 x 1.32 = 29.04
24 1 15 =(24x 1.151) = 24 x 1.15 = 27.6
26 0 15 =(26 x 1.150) = 26
Total = 164.24
PV of outflows 0 - - 75

Calculate the MIRR

= (Terminal cash inflows / Present value of cash outflows) 1/n- 1

= (164.24 / 75)1/6 - 1

= (2.1899) .17- 1

= 1.1425 -1 = .1425 = 14.25%

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