Central Machines is considering a project that will generate cash flow of $2,304,714 per year for...

Central Machines is considering a project that will generate cash flow of $2,304,714 per year for 4 years, followed by $4,233,139 per year for 3 years, followed by $5,501,087 per year for 3 years. All cash flows will occur at the end of the year. If the cost of the project is $16,064,914, and the company's WACC is 11.7%, what is the Modified Internal Rate of Return of the project? State your answer as a percentage to 2 decimal places.

Expert Solution

Ans 14.02%

Year		Cash Flows	FV Factor	Formula	Terminal Value
0		-16064914
1		2304714	2.707	(1 + 11.7%)^(10-1)	62,38,721
2		2304714	2.423	(1 + 11.7%)^(10-2)	55,85,248
3		2304714	2.170	(1 + 11.7%)^(10-3)	50,00,222
4		2304714	1.942	(1 + 11.7%)^(10-4)	44,76,474
5		4233139	1.739	(1 + 11.7%)^(10-5)	73,60,857
6		4233139	1.557	(1 + 11.7%)^(10-6)	65,89,845
7		4233139	1.394	(1 + 11.7%)^(10-7)	58,99,593
8		5501087	1.248	(1 + 11.7%)^(10-8)	68,63,646
9		5501087	1.117	(1 + 11.7%)^(10-9)	61,44,714
10		5501087	1.000	(1 + 11.7%)^(10-10)	55,01,087
			Total	5,96,60,407


	MIRR =	(Sum oF terminal Cash Flows/ Initial Investment)^1/n - 1
		(59660407 / 16064914)^1/10 - 1
		(59660407 / 16064914)^0.10 - 1
		14.02%

jeff jeffy answered 1 year ago

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