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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.

Solutions

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 3 years ago
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