Question

Project L costs $35,000, its expected cash inflows are $13,000 per year for 8 years, and its WACC is 10%. What is the project's MIRR? Round your answer to two decimal places. Do not round your intermediate calculations.

%

Answer 1

Modified Internal Rate of Return is the rate at which Present value of Terminal Value is equals to Initial Cost.

Terminal Value is Future value of all cash inflows at appropriate required rate on end of Project.

Manually, we can calculate MIRR with following equation

where,

n = Project life

putting the values -

Thus MIRR = 19.82%

We can also calculate MIRR using Excel -

Please refer to below spreadsheet for calculation and answer. Cell reference also provided -

Cell reference -

Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.