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Ingram electric is considering a project with an initial cash outflow of $800000. this project is...

Ingram electric is considering a project with an initial cash outflow of $800000. this project is expected to have cash inflows of $350000 per year in year 1,2,3. the company has a wacc of 8.65% which is used as its reinvestment rate. whats the projects modified internal rate of return?

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Expert Solution

YEARS Amount ($) x factor @8.65% PV of Cash Outflows PV of Cash Inflows
0 $      (8,00,000)                    1.00000 $ (8,00,000.00) $                  -  
1 $ 3,50,000.00                    0.92039 $                    -   $ 3,22,135.30
2 $ 3,50,000.00                    0.84711 $                    -   $ 2,96,489.00
3 $ 3,50,000.00                    0.77967 $                    -   $ 2,72,884.49
Total $ (8,00,000.00) $ 8,91,508.79
N= 3
MIRR = [PV inflows/PV outflows]^1/n×(1+r) -1
= [891508.79/800000]^1/3(1+0.0865)-1
= 12.64%

Answer is:

12..64%

please rate

jeff jeffy answered 2 years ago
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