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5. Consider an investment project whose cash flows are given in Table below. Calculate the MIRR assuming that all inflows and
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Answer #1

Future worth of inflow = 12000 * (1+0.15)^2 = 12000 * 1.15^2 = 15870

Present worth of outflow = 5000 + 40000 / (1+0.15)^2 + 20000 / (1+0.15)^3

= 5000 + 40000 / (1.15)^2 + 20000 / (1.15)^3

= 48396.07

Let ERR be I%, then

48396.07 * (1+i)^3 = 15870

(1+i)^3 = 15870 / 48396.07 = 0.327919

1+i = 0.327919 ^ (1/3) = 0.689586799

I = 0.689586799 - 1 = -0.3104132

I = -31.04%

As ERR is negative, this is not a good investment

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