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AVprozaik [17]
3 years ago
10

Ingram Electric Products is considering a project that has the following cash flow and WACC data. What is the project's MIRR? No

te that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.
WACC: 11.00%

Year 0 1 2 3

Cash flows -$800 $350 $350 $350
Business
1 answer:
SpyIntel [72]3 years ago
6 0

Answer:

the project's MIRR is 13.50 %.

Explanation:

MODIFIED INTERNAL RATE OF RETURN (MIRR)

-It is the rate that causes the Present Value of the Terminal Value (Future Cash flows at the end of the Project) to equal Present Value of Cash outflows.

-MIRR assumes a reinvestment rate at the end of the project

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)

                                 = $350 x (1.11) ^ 2 + $350 x (1.11) ^ 1 + $350 x (1.11) ^ 0

                                 = $431.24 + $388.50 + $350.00

                                 = $1,169.74

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

(-$800)        CFj

0          CFj

0          CFj

$1,169.74  CFj

Shift IRR/Yr 113.50 %

Therefore, the MIRR is 13.50 %

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. The curve bows outwards due to the law of increasing opportunity fee, which states that the quantity of an amazing which must be sacrificed for every additional unit of any other suitable is extra than become sacrificed for the preceding unit.

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Clearer question;

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