Question

Malholtra Inc. is considering a project that has the following cash flow and WACC data.
What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.

WACC: 10.00%
Year 0 1 2 3 4
Cash flows $850 $300 $320 $340 $360

a) 14.08% b) 15.65% c) 17.21% d) 18.94% e) 20.83%

Answer 1

Answer:

The correct option is B,15.65%

Explanation:

Modified Internal Rate of Return(MIRR) can be determined by using the excel MIRR function,whose formula is given below:

=MIRR(values,finance rate,reinvestment rate)

The values are the cash inflows and the initial capital outlay of $850

the finance rate is the same as the reinvestment of 10% which is the rate of return that would make the investment present values of cash inflows equal the initial investment

MIRR=15.65% as found in the attached.