Question

Your firm is considering a project that will cost $4.499 million up front, generate cash flows of $3.49 milion per year for 3 years, and then have a cleanup and shutdown cost of $6.03 million in the fourth year. 2. How many IRRS does this project have? b. Calculate a modified IRR for this project assuming a discount and compounding rate of 9.5% c. Using the MIRR and a cost of capital of 9.5%, would you take the project? a. How many IRRs does this project have? The project has 2 RRs. (elect from the drop-down menu.) b. Calculate a modified IRR for this project assuming a discount and compounding rate of 95% The MIRR for this project is % (Round to two decimal places.) c. Using the MIRR and a cost of capital of 9.5%, would you take the project? (Select from the drop-down menu Yes the project should be taken because the MIRR > 95%

b

Answer 1

Solution :- (b)

Solution :-
Year	Cashflow	FVF @9.5%	PVF @ 9.5%	FV of +ve CF	PV of -ve CF
0	($4.499)		1.000		($4.50)
1	$3.490	1.313		$4.582
2	$3.490	1.199		$4.185
3	$3.490	1.095		$3.822
4	($6.030)		0.696		($4.20)
		TOTAL		$12.588	($8.696)

MIRR = (FV of +ve CF / PV of -ve CF)^1/n - 1

MIRR = (12.588 / 8.696)^1/4 - 1

MIRR =  (1.4476)^1/4 - 1

MIRR = 1.09689 - 1 = 0.09689 = 9.69 %