Question

Compute the MIRR statistic for Project I if the appropriate cost of capital is 11 percent....

Compute the MIRR statistic for Project I if the appropriate cost of capital is 11 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

   

  Project I
  Time: 0 1 2 3 4
  Cash flow –$12,300 $5,980 $4,830 $2,170 $2,650
Business   Finance   
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Answer #1
The formula to calculate MIRR i.e. Modified Internal rate of return is as under,
MIRR = [Future value of positive cash flows / Present value of negative cash flows]^(1/n) - 1
Calculation of future value of positive cash flows
Year Cash Inflow Future value factor at 11% Future Value
1 $5,980.00           1.36763 $8,178.43
2 $4,830.00           1.23210 $5,951.04
3 $2,170.00           1.11000 $2,408.70
4 $2,650.00           1.00000 $2,650.00
Future value of Positive Cash flows $19,188.18
MIRR = [$19188.18 / $12300]^(1/4) - 1
MIRR = 1.117589 - 1
MIRR = 11.76%
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