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Problem 11-21 MIRR Project X costs $2,000, and its cash flows are the same in Years...

Problem 11-21
MIRR

Project X costs $2,000, and its cash flows are the same in Years 1 through 10. Its IRR is 17%, and its WACC is 8%. What is the project's MIRR? Round your answer to two decimal places.

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Answer #1

At irr,present value of inflows=present value of outflows.

Hence present value of inflows=$2000

present value of inflows=Present value of annuity

=Annuity[1-(1+interest rate)^-time period]/rate

Hence

2000=Annuity[1-(1.17)^-10]/0.17

2000=Annuity*4.658603628

Annuity=2000/4.658603628

=$429.3131934

Future value of annuity=Annuity[(1+rate)^time period-1]/rate

=$429.3131934[(1.08)^10-1]/0.08

=$429.3131934*14.48656247

=$6219.272395

MIRR=[Future value of inflows/Present value of outflows]^(1/time period)-1

=[6219.272395/$2000]^(1/10)-1

=12.01%(Approx).

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