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schepotkina [342]
3 years ago
10

Purple Turtle Group is analyzing a project with the following cash flows: Year Cash Flow 0 -$795,000 1 $375,000 2 $-500,000 3 $6

00,000 4 $400,000 This project has cash flows. Purple Turtle Group’s WACC is 5.50%. Calculate this project’s modified internal rate of return (MIRR).
Business
1 answer:
Phantasy [73]3 years ago
6 0

Answer:

MIRR = 4.32%

Explanation:

year           cash flow

0               -$795,000

1                 $375,000

2               -$500,000

3                $600,000

4                $400,000

Since there are 2 cash outflows, the IRR calculation would result in two different answers (1 for every cash outflow), that is why we use the MIRR function in excel.

=MIRR (cash flows, finance rate, reinvestment rate)

=MIRR (-795000 to 400000, 5.5%, 5.5%)

Since we are only given one interest rate, we will use it as our finance rate and our reinvestment rate.

MIRR = 4.32%

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