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Problem 9-20 MIRR [LO6] RAK Corp. is evaluating a project with the following cash flows:   ...

Problem 9-20 MIRR [LO6]

RAK Corp. is evaluating a project with the following cash flows:

  

Year Cash Flow
0 –$ 30,000
1 12,200
2 14,900
3 16,800
4 13,900
5 – 10,400

  

The company uses a discount rate of 12 percent and a reinvestment rate of 7 percent on all of its projects.

  

Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

  

  MIRR %

  

Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

  

  MIRR %  

Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

  

  MIRR %  
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Homework Answers

Answer #1

1. MIRR using discounting approach (using Excel):

Year Cash Flow
0 -30000.00 Discount Rate 12.00%
1 12200.00 Reinvest Rate 7.00%
2 14900.00 MIRR 16.42%
3 16800.00
4 13900.00
5 -10400.00

2. MIRR using reinvestment approach :

Year Cash Flow
0 -30000.00 Discount Rate 12.00%
1 12200.00 Reinvest Rate 7.00%
2 14900.00 MIRR 12.81%
3 16800.00
4 13900.00
5 -10400.00


3. MIRR using combination approach :

Year Cash Flow
0 -30000.00 Discount Rate 12.00%
1 12200.00 Reinvest Rate 7.00%
2 14900.00 MIRR 13.74%
3 16800.00
4 13900.00
5 -10400.00
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