Question

You're evaluating a project with the following cash flows: initial investment is $124 million dollars, and cash flows for years 1-3 are $10, $61 and $78 million dollars, respectively. The firm's WACC is 10%. What is this project's MIRR?

Answer 1

Year	Cash Flow	FV @ 10%	Future Value
1	$10.00	1.2100	$12.10
2	$61.00	1.1000	$67.10
3	$78.00	1.0000	$78.00
(Future Value of Positive Cash Flows at the Cost Of Capital of the Firm			$157.20
Present Value of all Negative Cash Flows at the Financing Cost of the Firm = $124/(1.10)^0	$124.00
MIRR = (Future Value of Positive Cash Flows at the Cost Of Capital of the Firm / Present Value of all Negative Cash Flows at the Financing Cost of the Firm)^(1/n) – 1
MIRR = (($157.20/$124)^(1/3))-1	8.23%