A project has the following cash flows : Year Cash Flows 0 −$12,000 1 5,290 2...

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%

Expert Solution

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%

jeff jeffy answered 1 year ago

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