What is the MIRR for this project using the reinvestment approach? The interest rate is 9 percent

Yellow Day has a project with the following cash flows:

Year |Cash Flows

0 −$26,400

1 10,250

2 17,900

3 9,360

4 −3,300

What is the MIRR for this project using the reinvestment approach? The interest rate is 9 percent

Multiple Choice

15.78%

14.73%

12.62%

11.93%

9.95%

Solutions

Expert Solution

Calculation of the MIRR :-

Intial investment = $ 26,400

Calculation of the Terminal cash inflows :-

Years	Cash flows	CF Invest At Interest rate	Terminal cash flows
1	$ 10,250	1.295029	$ 13,274.05
2	$ 17,900	1.1881	$ 21,266.99
3	$ 9,360	1.09	$ 10,202.40
4	$ (3,300)	1	$ (3,300.00)
Terminal cash flows	$ 41,443.44

MIRR = (Terminal cash inflows / Initial investment )^1/n - 1

=($ 41,443.44 / 26,400)^1/4 - 1

=(1.5698272)^1/4 -1

= 1.119342414 - 1 = 0.119342414

MIRR = 11.93%

jeff jeffy answered 1 year ago

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