Question

In the Excel application, the "MIRR" and "PMT" functions are financial functions. Write a report outlining the concepts, features, and uses of the two financial functions, outlining the process by which people use the function in that part of the company and find a function or method. The problem of financial analysis is similar to the above two functions comparing the strengths and advantages of two functions compared to other ways in the same problem. Take a mathematical example to illustrate each function.

Answer 1

In excel MIRR function is to calculate the modified internal rate of return. Modified internal rate of return improves on the drawback of the IRR where IRR believes that the amount is being invested at the IRR. To calculate MIRR we need to first calculate the IRR and then assume a required rate of return. Let’s say a project with initial investment of 100000 generate two cash flows of 75000 each at year 1 and year 2. Let’s say the required rate is 15%. Here we have calculated MIRR of the project.

B C D E F Year Cash flows 0 (100,000.00) 1 75,000.00 75,000.00 2 IRR 31.87% MIRR MIRR(C3:C5,31.87%,15%) 26.98%

The PMT function in an excel is used to calculate the periodic payment of a loan or any other obligation. The PMT function calculates as to what is the periodic payment you will make over a period of time. Let’s say you borrow a loan of 100,000 and you play to repay the loan over 5 equal payments in the next 5 years. Let's say the interest rate is 10%.

Now here we use the PMT function to calculate what annual payment has to be made

=PMT(10%,5,100000)

The annual payment to be made is 26,379.75.