Question

A project has the following cash flows :

Year	Cash Flows
0	−$12,000
1	5,290
2	7,630
3	5,040
4	−1,580

Assuming the appropriate interest rate is 10 percent, what is the MIRR for this project using the discounting approach?

19.21%

15.23%

13.96%

11.63%

17.77%

Answer 1

Year	Cash Flow	Calculations	Future Value
1	$          5,290	=5290*1.10^3	$     7,040.99
2	$          7,630	=7630*1.10^2	$     9,232.30
3	$          5,040	=5040*1.10^11	$     5,544.00
4	$         -1,580	=-1580*1.10^0	$   -1,580.00
	Total		$   20,237.29
We need to calculate at which rate present value of $20237.3 will become 12000
It can be calculated by using following formula
	PV= FV/(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= periods in number
	12000=$20237.30/(1+r)^4
	r =13.96%
Therefore MIRR is 13.96%