Yellow Day has a project with the following cash flows: Year Cash Flows 0 −$27,300 1...

Question

Question

Yellow Day has a project with the following cash flows:

What is the MIRR for this project using the reinvestment approach? The interest rate is 10 percent

Multiple Choice

business finance

Answer 1

Answer #1

Calculation of MIRR
Cost of capital		10%
Year	Total cash flow	Future Value factor @ 10%	Present values
1	$ 10,700	1.331	$ 14,242
2	$ 21,500	1.210	$ 26,015
3	$ 9,900	1.100	$ 10,890
4	$ (3,750)	1.000	$ (3,750)

			$ 47,397

	MIRR	=[(FV of Outflow/Initial Outflow)^(1/n)]-1
	MIRR	=[(47397/27300)^(1/4)]-1
	MIRR	14.79%

So option B is correct.

Answer 2

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