Question

Calculate the MIRR for the following project. The discount rate is 10%.

t=0 t=1 t=2 t=3

-100 60 -30 150

Answer 1

FV of Cash inflows = [CF_i * (1 + r)^{(n - i)}]

= [60 * (1 + 0.10)^{(3 - 1)}] + [150 * (1 + 0.10)^{(3 - 3)}]

= 72.6 + 150 = 222.6

PV of Cash outflows = [CF_i / (1 + r)ⁿ]

= 100 + [30 / (1 + 0.10)²]

= 100 + 24.79 = 124.79

MIRR = [FV of Cash inflows / PV of Cash outflows]^1/n - 1

= [222.6 / 124.79]^1/4 - 1

= [1.7837]^0.25 - 1

= 1.1557 - 1 = 0.1557, or 15.57%