Question

Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 9%.. Please use Excel

Year	A	B
0	$ (1,100.00)	$ (1,100.00)
1	$       650.00	$       250.00
2	$       410.00	$       345.00
3	$       220.00	$       370.00
4	$       270.00	$       720.00

What is Project A's MIRR?

What is Project B's MIRR

Answer 1

Solution

Here for calculation of MIRR the reinvestment rate used will be 9% i.e WACC and the Discounting rate used will also be 9%

MIRR=(FV of +ive cashflows /PV of -ve cashflows)^(1/n)-1

MIRR calcualtion given below

Excel formula

Thus

Projects A MIRR=13.7%

Projects A MIRR=13.99%