Question

Project A requires an initial outlay at t = 0 of $1,000, and its cash flows are the same in Years 1 through 10. Its IRR is 15%, and its WACC is 8%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places. %

Answer 1

Step-1:Calculation of annual cash flows
At IRR, Present value of annual cash flow is equal to its initial cost.
Annual cash flow		=pmt(rate,nper,pv)		Where,
		$      199.25		rate	=	15%
				nper	=	10
				pv	=	$ -1,000.00
Step-2:Calculation of MIRR
Year		Cash flow
0		$ -1,000.00
1		$      199.25
2		$      199.25
3		$      199.25
4		$      199.25
5		$      199.25
6		$      199.25
7		$      199.25
8		$      199.25
9		$      199.25
10		$      199.25
Finance rate		8%
Investment rate		8%
MIRR		=mirr(values,finance rate,reinvestment rate)
		= 11.18%
Note:
Values is the cash flow from year 0 to year 10.