Project A costs $3,000, and its cash flows are the same in Years 1 through 10....

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Project A costs $3,000, and its cash flows are the same in Years 1 through 10....

Project A costs $3,000, and its cash flows are the same in Years 1 through 10. Its IRR is 13%, and its WACC is 11%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places. %

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Answer 1

Answer #1

Answer:

Project A costs = $3,000

Its IRR is = 13%

Its cash flows are the same in Years 1 through 10

Since at IRR, NPV = 0, Hence PV of cash flows = Project cost = $3,000

To get annual cash flows we will use PMT function of excel:

PMT (rate, nper, pv, fv, type)

= PMT (13%, 10, -3000, 0, 0)

= $552.87

As such annual cash flows = $552.87

MIRR is calculated as below:

0 2 3 4 5 6 7 9 100 cost($3,000) $552.87 $552.87 $552.87 $552.87 $552.87 $552.87 $552.87 $552.87 $552.87 $552.87 53,000 5287 $5287 552.87 552.87 553287 $5287 $32.87 552.87 53287 553287 Cash flows IRR MIRR 13% 11.91% Using excel formula of MIRR, we get:

MIRR = 11.91%

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Answer 2

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Project A costs $3,000, and its cash flows are the same in Years 1 through 10....

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