Question
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%
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