Question

You're evaluating a project with the following cash flows: initial investment is $97 million dollars, and cash flows for years 1-3 are $11, $71 and $89 million dollars, respectively. The firm's WACC is 6%. What is this project's MIRR?

Answer 1

Cash Flows:
Year 0 = -$97 million
Year 1 = $11 million
Year 2 = $71 million
Year 3 = $89 million

WACC = 6%

Future Value of Cash Inflows = $11 million * 1.06^2 + $71 million * 1.06 + $89 million
Future Value of Cash Inflows = $176.6196 million

MIRR = (Future Value of Cash Inflows / Present Value of Cash Outflow)^(1/n) - 1
MIRR = ($176.6196 million / $97 million)^(1/3) - 1
MIRR = 1.82082^(1/3) - 1
MIRR = 1.2211 - 1
MIRR = 0.2211
MIRR = 22.11%

So, MIRR of this project is 22.11%