You are considering an investment project with the cash flows of -400 (the initial cash flow),...
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You are considering an investment project with the cash flows of -400 (the initial cash flow), 700 (cash flow at year 1), -200 (cash flow at year 2). Given the discount rate of 12%, compute the Modified Internal Rate of Return (MIRR) using the discountingapproach.
31.91%
25.13%
27.55%
29.71%
Homework Answers
Your Required Answer is option B i.e. 25.13%
In case of Discounting Approach negative cash flow is taken at their present value and added in initial investment but positive cash flow.
and after that MIRR is calculated.
| Year | Cash flow | PV of negative cash Flow | |
| 0 | -400 | ($400.00) | ($559.44) (400+159.44 |
| 1 | 700 | $700.00 | |
| 2 | -200 | ($159.44) | |
| MIRR | 25.13% |
Use formula in excel for calculation of MIRR
=MIRR(Value,Finance Rate,Reinvestment Rate)
I hope this clear your doubt.
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