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In: Finance

New Century Energy Partners, Ltd. plans to explore a new oil field to expand its overseas...

New Century Energy Partners, Ltd. plans to explore a new oil field to expand its overseas operations. This capital investment project requires an initial outlay of $10 million and it is expected to generate annual cash flows of $3 million for a period of five years. At the end of the sixth year, the firm will incur shut-down and clean-up costs of $2 million.

Assuming that projects of similar risk have a cost of capital is 11%, what is the MIRR for this project?

Solutions

Expert Solution

Cash flows Year
                   (10.00) 0
                     3.000 1
                     3.000 2
                     3.000 3
                     3.000 4
                     3.000 5
                   (2.000) 6

Use MIRR function in Excel

MIRR = 11.03%

jeff jeffy answered 3 years ago
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