Question

Slow Ride Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$28,400 1 10,600 2 13,300 3 15,200 4 12,300 5 –8,800 The company uses a 8 percent interest rate on all of its projects. Calculate the MIRR of the project using all three methods. Required: (a) MIRR using the discounting approach.(Do not round your intermediate calculations.) (b) MIRR using the reinvestment approach. (Do not round your intermediate calculations.) (c) MIRR using the combination approach. (Do not round your intermediate calculations.)

Slow Ride Corp. is evaluating a project with the following cash flows:

  

Year	Cash Flow
0	–$13,200
1	5,900
2	6,600
3	6,300
4	5,200
5	–5,700

  

The company uses a 11 percent discount rate and an 8 percent reinvestment rate on all of its projects. Calculate the MIRR of the project using all three methods using these interest rates.

   

Required:
(a)	MIRR using the discounting approach.(Do not round your intermediate calculations.)
	(Click to select)15.46%17.82%17.31%16.97%16.12%

  

(b)	MIRR using the reinvestment approach.(Do not round your intermediate calculations.)
	(Click to select)11.71%12.58%12.95%14.36%12.33%

  

(c)	MIRR using the combination approach.(Do not round your intermediate calculations.)

Answer 1

1)

a) using discounting approach

Present value of negative cash flows = [10,600/(1+MIRR)] + [13300/(1+MIRR)²] + [15200/(1+MIRR)³] + [12300/(1+MIRR)⁴]

34389.1321 =  [10,600/(1+MIRR)] + [13300/(1+MIRR)²] + [15200/(1+MIRR)³] + [12300/(1+MIRR)⁴]

by trial and error we find that , MIRR = 0.176262 or 17.6262% or 17.63% ( rounding off to 2 decimal places)

b) using reinvestment approach

c) using combined approach