Question

ment: Chapter 11 Homework Graded Assignment Score: 60.00 % Save Submit Assignment for Grading ns 4 Question 10 of 10 Check My Work eBook A project has the following cash flows: 0 1 2 3 4 5 -$700 $200 -$X $400 $208 $408 This project requires two outflows at Years 0 and 2, but the remaining cash flows are positive, Its WACC is 14% , and its MIRR is 15.15 % . What is the Year 2 cash outflow? Enter your answer as a positive value. Do not round intermediate calculations, Round your answer to the nearest cent. $ Check My Work 0Icon Key 4 Question 10 of 10 6 11/A O

Answer 1

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

=1

= [{$200 * (1 + 0.14)^(5-1)} + {$208 * (1 + 0.14)^(5-3)} + {$400 * (1 + 0.14)^(5-4)} + {$408 * (1 + 0.14)^(5-5)}]

= [$337.79 + $270.32 + $456 + $408] = $1,472.11

PV of Cash Outflows = [Cf(i) / (1 + r)ⁿ]

=1

= $700 + [X / (1 + 0.14)²]

= $700 + (X/1.2996)

Project's MIRR = [FV of Cash Inflows / PV of Cash Outflows]^1/n - 1

0.1515 = [$1,472.108832 / {$700 + (X/1.2996)}]^1/4 - 1

[1 + 0.1515]⁴ = $1,472.108832 / {$700 + (X/1.2996)}

$700 + (X/1.2996) = $1,472.11 / 1.7581

X/1.2996 = $837.31 - $700

X = $137.31 * 1.2996 = $178.44