Simmons Shoes Project Cash Flows and Modified Internal Rate of Return (MIRR)

Simmons Shoes Project Cash Flows and MIRR

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Simmons Shoes is considering a project with the following cash flows:

TimeProject Cash Flows ($)

0-700

2-200

3600

4500

Simmons' WACC is 10 percent. What is the project's modified internal rate of return (MIRR)?

A. 28.93%

B. 17.10%

C. 18.26%

D. 29.52%

E. 25.28%

Click on the arrows to vote for the correct answer

A. B. C. D. E.

There are three steps to getting an MIRR:

1. Find PV of outflows:

-$700 + -$200/(1.1)^2 = -$865.2893.

2. Find FV of inflows:

$400 (1.1)^3 + $600(1.1) + $500 = $1,692.40.

3. Find MIRR:

N = 4 -

PV = -865.2893 -

PMT = 0 -

FV = 1,692.40 -

Solve for I = MIRR = 18.2593%.

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