Project A requires an initial outlay at t = 0 of $4,000, and its cash flows...

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Project A requires an initial outlay at t = 0 of $4,000, and its cash flows...

Project A requires an initial outlay at t = 0 of $4,000, and its cash flows are the same in Years 1 through 10. Its IRR is 16%, and its WACC is 9%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places. %

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Answer 1

Answer #1

At irr,present value of inflows=present value of outflows.=$4000

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

4000=Annuity[1-(1.16)^-10]/0.16

4000=Annuity*4.83322748

Annuity=4000/4.83322748

=$827.604332

For MIRR:

Future value of annuity=Annuity[(1+rate)^time period-1]/rate

=827.604332[(1.09)^10-1]/0.09

=827.604332*15.1929297

=$12573.7344

MIRR=[Future value of annuity/Present value of outflows]^(1/time period)-1

=[12573.7344/4000]^(1/10)-1

=12.13%(Approx).

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Answer 2

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