Question

In: Finance

What is the MIRR of a project that costs $694, generates free cash inflows of $239...

What is the MIRR of a project that costs $694, generates free cash inflows of $239 at the end of each of the first 7 years and an outflow of 148 at the end of Year 8? The reinvestment rate is 6.93%. (Record your answer to the nearest 0.01%, drop the % symbol. E.g., if your answer is 10.7745%, record it as 10.77.)

Blank 1. Calculate the answer by read surrounding text.

Solutions

Expert Solution

MIRR can be computed using with Excel or Without Excel

Assumptions

1) Cash Flows are occoured at the end of each year.

2) The Reinvestment Rate = the Borrowing Rate = 6.93%

MIRR - With Excel

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Cash Flows $             -694 $           239 $           239 $           239 $           239 $           239 $           239 $        239 $      -148
=MIRR(Cashflows,Borrwing Rate, Reinvesting Rate) 13.87
MIRR(Cash Flows,6.93%,6.93%)

MIRR Without Excel

the formula for MIRR is as below

MIRR = (Future Value of Cash Inflows/Present Value of Cash Outflows)^(1/n) -1

where n is the no. of years of the project

The furture value of Cash inflows is generated using a reinvestment rate of 6.93% and the present values are computed using a discount rate of 6.93%.

Years Cash Inflow (A) Future Value Factor (B) Computation of Future Value Factors Future Values of Cash Inflows                     (C = B*A)
Year 1 $        239 1.598442 =(1+6.93%)^(8-1)                382.03
Year 2 $        239 1.494849 =(1+6.93%)^(8-2)                357.27
Year 3 $        239 1.39797 =(1+6.93%)^(8-3)                334.11
Year 4 $        239 1.307369 =(1+6.93%)^(8-4)                312.46
Year 5 $        239 1.22264 =(1+6.93%)^(8-5)                292.21
Year 6 $        239 1.143402 =(1+6.93%)^(8-6)                273.27
Year 7 $        239 1.0693 =(1+6.93%)^(8-7)                255.56
Total                  2,207
Cash Outflow (A) Present Value Factor (B) Computation of Present Value Factors Present Values of Cash Outflows                   (C = B*A)
Year 0 $        694           1.00 =1/(1+6.93%)^(0)                694.00
Year 8 $        148           0.59 =1/(1+6.93%)^(8)                  86.59
Total                780.59

Therefore MIRR = (2207/780.59)^(1/8) -1

Answer MIRR = 13.87

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

2. What is the MIRR of a project that costs $696, generates free cash inflows of...
2. What is the MIRR of a project that costs $696, generates free cash inflows of $211 at the end of each of the first 4 years and an outflow of 119 at the end of Year 5? The reinvestment rate is 7.43%. (Record your answer to the nearest 0.01%, drop the % symbol. E.g., if your answer is 10.7745%, record it as 10.77.)
MIRR A project has an initial cost of $66,300, expected net cash inflows of $13,000 per...
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.
What is the NPV of a project that costs $80,000 today and cash inflows $45,000 annually...
What is the NPV of a project that costs $80,000 today and cash inflows $45,000 annually for three years from today if the opportunity cost of capital is 14?
What is the MIRR of project with the following cash flows? The discounting rate is 14%....
What is the MIRR of project with the following cash flows? The discounting rate is 14%. Year Cash Flow 0 -1,200,000 1 400,000 2 500,000 3 500,000 4 500,000 5 500,000 6 500,000
What is NPV, IRR, PI, MIRR of a project with the following cash flows if the...
What is NPV, IRR, PI, MIRR of a project with the following cash flows if the discount rate is 14 percent? Year CF 0 -18,000    1 5000 2 7500 3 8400 4 2100 Also upload your excel files showing your work.
QUESTION 21 Calculate the payback period for a project that costs $400,000 if the cash inflows...
QUESTION 21 Calculate the payback period for a project that costs $400,000 if the cash inflows are $165,000 in year 1, $182,000 in year 2, $151,000 in year 3, and $146,000 in year 4. 2.541 years 2.351 years 3.114 years 3.894 years none of the above
16.  Problem 11.21 (MIRR) Project A costs $4,000, and its cash flows are the same in Years...
16.  Problem 11.21 (MIRR) Project A costs $4,000, and its cash flows are the same in Years 1 through 10. Its IRR is 16%, and its WACC is 9%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.
1) A project costs $150,000 and generates a cash flow of $75000 in year 1,$25000 in...
1) A project costs $150,000 and generates a cash flow of $75000 in year 1,$25000 in year 2 and then $10000 in year 3 through 10. What is the payback of the project? a) 5 years b) 6 years c) 8 years d) 7 years 2) A project requires an initial outflow of $100,000 and is expected to produce $20000 inflows over each of the next ten years. If the required return of the project is 8%, what is its...
Winston Clinic is evaluating a project that costs $50,000 and has expected net cash inflows of...
Winston Clinic is evaluating a project that costs $50,000 and has expected net cash inflows of $12,000 per year for eight years. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12%. 1. What is the project’s NPV? 2. What is the project’s IRR? 3. What is the project’s MIRR? The director of capital budgeting for Big Sky Health System, Inc. has estimated the following cash flows for a new...
Winston Clinic is evaluating a project that costs $50,000 and has expected net cash inflows of...
Winston Clinic is evaluating a project that costs $50,000 and has expected net cash inflows of $12,000 per year for eight years. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12%. What is the project’s MIRR? (hint: remember to put the answer as a percentage). Choice: 13.9% Choice: 14.5% Choice: 5.80% Choice: 22.1%
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT