Question

Turner Enterprises is analyzing a project that is expected to have annual cash flows of $46,400,...

Turner Enterprises is analyzing a project that is expected to have annual cash flows of $46,400, $51,300 and –$15,200 for Years 1 to 3, respectively. The initial cash outlay is $65,900 and the discount rate is 12 percent. What is the modified IRR?

O 16.98%

O 17.77%

O18.13%

O 17.04%

O 18.66%

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Answer #1

PV of Cash Outflows =65900+15200/(1+12%)^3 =76719.06
FV of cash Inflows =46400*(1+12%)^2+51300*(1+12%)^1 =115660.16
MIRR =(FV of cash Inflows/PV of cash Outflows)^(1/n)-1 =(115660.16/76719.06)^(1/3)-1 =14.66%

None of The options are correct
However since option is 18.66% it might be 14.66%

Alternate method using excel formula also gives 14.66%

Year A
1 0 -65900
2 1 46400
3 2 51300
4 3 -15200
MIRR 14.66%
Excel FormulA MIRR(A1:A4,12%,12%)
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