Answer:
The answer is 25.19% .
Note: The values were not stated for the net series cash flows, during my research and i found the complete question and solved it.
Explanation:
<em>From the question given,</em>
<em>The first step is to make use of a table for the net cash flow series</em>
<em>Year 1 2 3 4 5 6</em>
<em>Net cash flow $4100 $2000 $7000 $12000 $700 $800</em>
<em>Then,</em>
<em>Solution : MIRR is defined as modified internal rate of return, It accounts for the positive cash flows with reinvestment by using re-investment rate and negative cash flows are calculated at their present values to keep the fund aside by using finance rate.
</em>
<em>
As given also reinvestment rate = 20% and finance cost rate = 10%.
</em>
<em>
Now, from the table given of cash flows, we will calculate the future value of all cash flows in year 6.
</em>
<em>
FV = 4100*(1+0.20)^5 + 12000*(1+0.20)^2 + 800*(1+0.20)^0 = $28282.11
</em>
<em>
Now,</em>
<em> By applying the rate of we will computer teh PV of -ve cash flows :
</em>
<em>
PV = -2000/(1+0.1)^2 + -7000/(1+0.1)^3 + -700/(1+0.1)^5 = -$7346.73
</em>
<em>
Now MIRR can be calculated by using the formula , MIRR = \√[n]{FV(positive cash flows/PV of negative cash flows)}-1 = \√[6]{28282.11/7346.74)}-1
</em>
<em>
MIRR = 1.2519-1 = 0.2519 or 25.19%
</em>
<em>
Therefore, the only value Possible = 25.19% in this case.</em>
