Question

Project L costs $65,000, its expected cash inflows are $9,000 per year for 8 years, and its WACC is 13%. What is the project's MIRR? Round your answer to two decimal places. Do not round your intermediate calculations.

Answer 1

Future value of cash flow 1 = 9000 ( 1 + 0.13)⁷ = 21,173.4493

Future value of cash flow 2 = 9000 ( 1 + 0.13)⁶ = 18,737.5658

Future value of cash flow 3 = 9000 ( 1 + 0.13)⁵ = 16,581.9166

Future value of cash flow 4 = 9000 ( 1 + 0.13)⁴ = 14,674.2625

  Future value of cash flow 5 = 9000 ( 1 + 0.13)³ = 12,986.073

  Future value of cash flow 6 = 9000 ( 1 + 0.13)² = 11,492.1

Future value of cash flow 7 = 9000 ( 1 + 0.13)¹ = 10,170

  Future value of cash flow 7 = 9000 ( 1 + 0.13)⁰ = 9,000

Adding all the future values: 9,000 + 10,170 + 11,492.1 + 12,986.073 + 14,674.2625 + 16,581.9166 + 18,737.5658 + 21,173.4493 = 114,815.3672

Fv = pv ( 1 + r)ⁿ

114,815.3672 = 65,000 ( 1 + r)⁸

1.76639 = (1 + r)⁸

8th root of 1.76639 is 1.073707

1.07307 = 1 + r

r = 0.07307 or 7.31%

MIRR is 7.31%