Question

MIRR

Project A costs $2,000, and its cash flows are the same in Years 1 through 10. Its IRR is 17%, and its WACC is 9%. What is the project's MIRR? Do not round off the intermediate calculation. Round your answer to two decimal places. %

Answer 1

We can find annual cash inflow

Initial cash outflow = Annual cash inflow * PV factor of annuity @ 17% for 10 years

2000 = X * 4.65860

X = 2000/ 4.65860

    = 429.31

Now we need to find MIRR.

MIRR is improved version of IRR, While calculating MIRR it is assumed that cash inflow resulting from the asset or project will not be kept idle however it will be invested further to generate more return

MIRR could be calculated using formula, however it is much easier to use excel.

Year	Cash Inflow
0	-2000
1	429.31
2	429.31
3	429.31
4	429.31
5	429.31
6	429.31
7	429.31
8	429.31
9	429.31
10	429.31
MIRR	12.55%
Formula	=MIRR(data range, finance rate, reinvestment rate)

MIRR 12.55%