Question

Elliott Corp. is evaluating a project with the following cash flows:

Year	Cash Flow
0		–$	20,000
1			8,000
2			8,800
3			9,300
4			6,500
5		–	6,000

Requirement 1:

The company uses an interest rate of 9 percent on all of its projects. In the table below, show the modified cash flows and calculate the modified internal rate of return (MIRR) using the "combination" approach. (Do not round intermediate calculations. Negative amounts should be indicated with a minus sign. Round your answers to 2 decimal places (e.g., 32.16).)

Year	Combination Approach
0	$
1	$
2	$
3	$
4	$
5	$
MIRR	%

Answer 1

Present value of net cash outflows:
Initial		$ 20,000.00
Year 5	6000/1.09^5	$    3,899.59
		$ 23,899.59
Year	Cash Flow	FV at 9%	Future Value
1	8000	1.4116	11,292.65
2	8800	1.2950	11,396.26
3	9300	1.1881	11,049.33
4	6500	1.0900	7,085.00
Total FV of net cash inflows			40,823.24
MIRR = (FV of net cash inflows/PV of net cash outflows)^(1/n)-1
MIRR = (40823.24/23899.59)^(1/5)-1
MIRR =	11.30%