Yellow Day has a project with the following cash flows: Year Cash Flows 0 −$27,000 1...

Yellow Day has a project with the following cash flows:

Year	Cash Flows
0	−$27,000
1	10,550
2	20,300
3	9,720
4	−3,600

What is the MIRR for this project using the reinvestment approach? The interest rate is 7 percent

Expert Solution

Answer

Reinvestment approach

Year	Cash Folw			Reinvested Cash flows
0	-$ 27,000
1	$ 10,550	1.07^3	1.22504	$ 12,924.20
2	$ 20,300	1.07^2	1.1449	$ 23,241.47
3	$ 9,720	1.07^1	1.07	$ 10,400.40
4	-$ 3,600	1.07^0	1	-$ 3,600.00
				$ 42,966.07

MIRR	=	(42966.07/27000)^(1/4)-1
	=	0.123156997
	=	12.32%

ekkarill92 answered 1 year ago

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