Question

The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net cash inflows are expected to be $27.7 million, all coming at the end of Year 1. The land must be returned to its natural state at a cost of $25 million, payable at the end of Year 2.

What is the project's MIRR at r = 7%? Do not round intermediate calculations. Round your answer to two decimal places.
%

What is the project's MIRR at r = 13%? Do not round intermediate calculations. Round your answer to two decimal places.
%

Calculate the two NPVs. Do not round intermediate calculations. Round your answers to the nearest cent.

1    $  

2    $  

Answer 1

MIRR = (FV of cash Inflow/PV of Cash outflow)^1/n -1

When r = 7% , FV of cash inflow = 27.7*(1+7%) = 29.639
PV of cash outflows = 4.4 + 25/(1+7%)² = 26.236
MIRR = (29.636/26.236)^1/2-1 = 6.29%

When r = 13% , FV of cash inflow = 27.7*(1+13%) = 31.301
PV of cash outflows = 4.4 + 25/(1+13%)² = 23.979
MIRR = (31.301/23.979)^1/2-1 = 14.25%

NPV with r =7% = -4.4 + 27.7/(1+7%) - 25/(1+7%)² = -0.35
NPV with r =13% = -4.4 + 27.7/(1+13%) - 25/(1+13%)² = 0.53

Please Discuss in case of Doubt

Best of Luck. God Bless
Please Rate Well