Question

A firm considers a project with the following cash flows: the initial cost at time 0 is $1,000 (negative), the following cash flows received are $1,000, $100, $50, $50 in Year 1 to Year 4, respectively. What's its MIRR if WACC-10%? O A) 13.00% B) 12.16% C) 11.70% D) 9.98% E) 10.62%

Answer 1

MIRR=(Future value of cash flows/initial investment)^(1/years)-1

Future value of cash flows= summation(Cashflows*(1+WACC)^years)

FV= 1000*(1+0.1)^(4-1)+ 100*(1+0.1)^(4-2) + 50*(1+0.1)^(4-3)+50*(1+0.1)^(4-4)

FV=1557

MIRR=(1557/1000)^(1/4)-1

MIRR=11.70%

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