Project L requires an initial outlay at t = 0 of $35,000, its expected cash inflows...

Project L requires an initial outlay at t = 0 of $35,000, its expected cash inflows are $8,000 per year for 9 years, and its WACC is 11%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

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Expert Solution

Year	Cash Flow (C)	Computation of FV Factor	FV Factor @ 11% (F)	FV (F x C)
1	$ 8,000	(1+0.11)⁸	2.30453776971757	$ 18,436.302158
2	$ 8,000	(1+0.11)⁷	2.07616015289871	$ 16,609.281223
3	$ 8,000	(1+0.11)⁶	1.870414552161	$ 14,963.316417
4	$ 8,000	(1+0.11)⁵	1.6850581551	$ 13,480.465241
5	$ 8,000	(1+0.11)⁴	1.51807041	$ 12,144.56328
6	$ 8,000	(1+0.11)³	1.367631	$ 10,941.048
7	$ 8,000	(1+0.11)²	1.2321	$ 9,856.80
8	$ 8,000	(1+0.11)¹	1.11	$ 8,880.00
9	$ 8,000	(1+0.11)⁰	1	$ 8,000.00
			Terminal Cash Flow	113311.776319

MIRR = ⁿ √ (Terminal cash flow/Outlay) – 1

= ⁹ √ ($ 113,311.776319/$ 35,000) – 1

= ($ 3.2374793234) ^0.111111111 – 1

= 1.13943529241 – 1

= 0.13943529241 or 13.94 %

MIRR of the project L is 13.94 %

jeff jeffy answered 1 year ago

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