Question

Project A costs $3,000, and its cash flows are the same in Years 1 through 10. Its IRR is 15%, and its WACC is 10%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

MIRR is 12.25%

Step-1:Calculation of annual cash flows for next 10 years
At IRR, present value of cash inflows is equal to Cost of project.
So, Annual cash inflow	=	Cost of Project	/	Present value of annuity of 1
	=	$   3,000.00	/	5.018769
	=	$      597.76
Working:
Present value of annuity of 1	=	(1-(1+i)^-n)/i		Where,
	=	(1-(1+0.15)^-10)/0.15		i	=	15%
	=	5.01876863		n	=	10
Step-2:Calculation of MIRR
Year		Cash flow
0		$ -3,000.00
1		$      597.76
2		$      597.76
3		$      597.76
4		$      597.76
5		$      597.76
6		$      597.76
7		$      597.76
8		$      597.76
9		$      597.76
10		$      597.76
Finance rate		10%
Reinvestment rate		10%
MIRR		=mirr(C18:C28,finance rate, reinvestment rate)
		= 12.25%