Question

MIRR

A project has an initial cost of $66,300, expected net cash inflows of $13,000 per year for 9 years, and a cost of capital of 10%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

FVCF(c) = the future value of positive cash flows at the cost of capital for the company

PVCF(fc) = the present value of negative cash flows at the financing cost of the company

n = number of periods

the future value of the positive cash flows is computed as:

Future Value of positive cash flows at t = 9

$13,000(1.1)⁸ + $13,000(1.1)⁷ + $13,000(1.1)⁶ + $13,000(1.1)⁵   + $13,000(1.1)⁴   + $13,000(1.1)³  + $13,000(1.1)²   + $13,000(1.1)  + $13,000  

= 27,866.65453 + 25,333.3223 + 23,030.293 + 20,936.63 + 19,033.3 + 17,303 + 15730 + 14300 + 13000

= 176,533.1998

Next, divide the future value of the cash flows by the present value of the initial outlay, which was $66,300

n = number of periods = 9

MIRR = (176,533.1998 / 66,300 ) ^1/9   - 1

  = (2.662642531) ^0.111111111

= 1.11495409 - 1

= .11495409 * 100

= 11.49540899

= 11.50 (rounded to 2 decimal places).