Question

In: Finance

What is Mirr? how do you find it using excel without using excel formula? Below is...

What is Mirr? how do you find it using excel without using excel formula?

Below is cash flow. I found IRR is 15.59% and required return is 12%

CF Y0 Y1 Y2 Y3 Y4 Y5 Y6
Capital spen $ (30,000,000.00) $ 15,062,400.00
Opp cost $   (5,000,000.00)
NWC $   (1,120,000.00) $      (150,000.00) $      (170,000.00) $      140,000.00 $   1,300,000.00
OCF $     9,015,600.00 $ 11,392,500.00 $ 12,193,200.00 $ 10,435,800.00 $ (2,640,000.00) $   (3,960,000.00)
CF $ (36,120,000.00) $     8,865,600.00 $ 11,222,500.00 $ 12,333,200.00 $ 26,798,200.00 $ (2,640,000.00) $   (3,960,000.00)

Solutions

Expert Solution

Modified Internal Rate of Return:

MIRR is called as the Modified Internal rate of Return. It is a financial Measure of an Investment's attractiveness. It is used in capital budgeting to rank alternative investments of equal size.

Calculation of Modified Internal Rate of Return:

CF Y0 Y1 Y2 Y3 Y4 Y5 Y6
Capital Spen -30000000 15062400
Opp Cost -5000000
NWC -1120000 -150000 -170000 140000 1300000
OCF 9015600 11392500 12193200 10435800 -2640000 -3960000
CF -36120000 8865600 11222500 12333200 26798200 -2640000 -3960000
Required Return @ 12% 1 0.892857 0.797194 0.71178 0.63551808 0.567427 0.506631
Discounted CF -36120000 7915714 8946508 8778528 17030740.6 -1498007 -2006259
PV 39167225.16
MIRR = nth root of (PV of Cashflows/investment)(1+ r) -1
            = 6th root of (39167225.16/36120000) (1+12%) -1
            = 1.032917 - 1
            = 3.292 %

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