Question

A project has an initial cost of $64,400, expected net cash inflows of $10,000 per year for 11 years, and a cost of capital of 12%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

Modified Internal rate of return assumes that positives cash flows are invested at the firm's cost of capital and
initial outlays are financed at the firm's financing cost.
In the give problem only one rate is given , hence we assume that cost of capital = cost of financing
The formula to calculate MIRR is as under,
MIRR = [FVCF / PVCF]^(1/n) - 1
FVCF = Future value of positive cash flows = $206545.83
PVCF = Present value of negative cash flows = $64400
n = no.of years = 11
Future value of positive cash flows at cost of capital of 10% is as under
Year	Cash inflow	Future value of factor @ 12%	Future Value
1	$10,000.00	3.10584821	$31,058.48
2	$10,000.00	2.77307876	$27,730.79
3	$10,000.00	2.47596318	$24,759.63
4	$10,000.00	2.21068141	$22,106.81
5	$10,000.00	1.97382269	$19,738.23
6	$10,000.00	1.76234168	$17,623.42
7	$10,000.00	1.57351936	$15,735.19
8	$10,000.00	1.404928	$14,049.28
9	$10,000.00	1.2544	$12,544.00
10	$10,000.00	1.12	$11,200.00
11	$10,000.00	1	$10,000.00
Future value of positive cash inflows			$206,545.83
MIRR = [206545.83 / 64400]^(1/11) - 1
MIRR = 1.111762 - 1
MIRR = 0.111762
MIRR = 11.18%