Question

Emann Systems is considering a project that has a cash flow as: (1,000), 450, 450, 450 for the years 0, 1, 2, 3 respectively. If WACC: 10 %, What is the project's MIRR?

Answer 1

Answer:

the project's MIRR is 14,20%.

Explanation:

The First Step is to Calculate the Terminal Value at end of year 3.  

Terminal Value (FV) = Sum of (PV x (1 + r) ^ 3 - n)

                                 = 450 x (1.10) ^ 2 + 450 x (1.10) ^ 1 + 450 x (1.10) ^ 0

                                 = 544.50 + 495.00 + 450.00

                                 = 1,489.50

The Next Step is to Calculate the MIRR using a Financial Calculator :

(1,000)         CFj

0          CFj

0          CFj

1,489.50  CFj

Shift IRR/Yr 14,2037 %

Therefore, the MIRR is 14,20%.