Question

1. Malholtra Inc. is considering a project that has the following cash flow and WACC data. What is the project's MIRR?

WACC:                                 12.00%

Year                       0                      1                      2                      3                      4      

Cash flows         -$850               $500               $400               $440               $360

Please show work with instructions for financial calculator or algebra, thank you

Answer 1

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence future value of inflows=500*(1.12)^3+400*(1.12)^2+440*(1.12)^1+360

=$2057.024

MIRR=[future value of inflows/Present value of outflows]^(1/time period)-1

=[2057.024/850]^(1/4)-1

=24.73%(Approx).