Question

You're evaluating a project with the following cash flows: initial investment is $148 million dollars, and cash flows for years 1-3 are $8, $61 and $70 million dollars, respectively. The firm's WACC is 8%. What is this project's MIRR?

Answer 1

Cash Flows:
Year 0 = -$148 million
Year 1 = $8 million
Year 2 = $61 million
Year 3 = $70 million

WACC = 8%

Future Value of Cash Inflows = $8 million * 1.08^2 + $61 million * 1.08 + $70 million
Future Value of Cash Inflows = $145.2112 million

MIRR = (Future Value of Cash Inflows / Present Value of Cash Outflow)^(1/n) - 1
MIRR = ($145.2112 million / $148 million)^(1/3) - 1
MIRR = 0.98116^(1/3) - 1
MIRR = 0.9937 - 1
MIRR = -0.0063
MIRR = -0.63%

So, MIRR of this project is -0.63%