A company is considering a project with the following cash flows:
TimeCash flow -
0-$100,000
150,000
250,000
350,000
4-10,000
The project's cost of capital is estimated to be 10 percent. What is the modified internal rate of return (MIRR)?
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A. B. C. D. E.C
First, calculate the present value of costs:
N = 4, I/YR = 10, PMT = 0, FV = -10,000, and solve for PV = -$6,830.13.
Add -$100,000 + -6,830.13 = -$106,830.13.
Then, find the terminal value of inflows:
Shift to BEGIN MODE, N = 3, I/YR = 10, PV = 0, PMT = -50,000, and solve for FV = $182,050.
Finally, shift back to END mode, and solve for MIRR, where N = 4, PV = $-106,830, PMT = 0, FV = 182,050, and solve for I/YR = 14.25%.