Question

A project has initial costs of $1,000 and subsequent cash inflows of $100, 200, 400 and 700. The company’s 10% cost of capital is an appropriate discount rate for this average risk project. Calculate the MIRR. Please show your work. Thank you.

Answer 1

Input	#
Cost of capital = k	10%
Reinvestment rate = r*	10%
Total years = n	4
Investment = I =	1,000.00

Assuming > Cost of capital = Reinvestment rate

Year	Cash flows = CF	Df = 1/(1+k)^Year	Present Value = CF x Df	CF x (1+r*)^(n-Year)
0	-1,000.00	1.000000	-1,000.0000	Exclude investment
1	100.00	0.909091	90.9091	133.10
2	200.00	0.826446	165.2893	242.00
3	400.00	0.751315	300.5259	440.00
4	700.00	0.683013	478.1094	700.00
		Total PV = NPV =	34.83	1,515.10

MIRR = Modified IRR = (TV ÷ I )1/n – 1

MIRR = (1515.10 ÷ 1000)^(1/4)-1

MIRR = 10.95%