Question

Project A requires an initial outlay at t = 0 of $5,000, and its cash flows are the same in Years 1 through 10. Its IRR is 13%, and its WACC is 9%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

At irr,present value of inflows=present value of outflows=$5000

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

5000=Annual cash inflows[1-(1.13)^-10]/0.13

5000=Annual cash inflows*5.42624348

Annual cash inflows=5000/5.42624348

=$921.447778

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

=921.447778[(1.09)^10-1]/0.09

=$921.447778*15.1929297

=13999.4913(Approx)

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

=[13999.4913/5000]^(1/10)-1

=10.84%(Approx).