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Note Level2 Heading 1 Emphasis Please watch TI BA ii Plus 1RR (1:53) and BA ii Plus MMRR of mixed cash flows (5:56) and answer the following questions. Given the following cash flows: Year Cash Flow (S):-500 90 90400 400 500 a What is the IRR of this stream of uneven cash flows b. What is the MIRR of this stream of uneven cash flows using a 10 percent reinvestment rate? Words 471 91 489 Do0 FA F6 F7
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Year 2 4. Cash Flows EXCEL SCREENSHOT: 1 Year 2 Cash Flows 0 3 5 IRR 35.86% 90 90 4 IRR -IRR(B2:G2 MIRR 27.36% 6 MIRR -MIRR(B2:G2,096, 1096 IRR & MIRR can be calculated using EXCEL FUNCTION IRR() & MIRR() respectively by inserting cash flows in B2 thru G2 as per EXCEL SCREENSHOT copied above IRR stands for Internal Rate of Return which is the discount rate that makes projects future cash equals to initial investment or in other words IRR is the rate which makes NPV equals to zero. Higher the IRR, higher the acceptability of a project. That is, project shall be accepted if IRR is greater than the cost of capital associated with the project. MIRR stands for Modified Internal Rate of Return which is an advanced project evaluation version of IRR (Internal Rate of Return) to consider even borrowing rate and reinvestment rate in the calculation. Higher the MIRR, higher the acceptability of a project. That is, project shall be accepted if MIRR is greater than the cost of capital associated with the project.

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