Assume that you, Rachel, are a young constable on a noble philanthropic mission
ID: 2646502 • Letter: A
Question
Assume that you, Rachel, are a young constable on a noble philanthropic mission to the lands of Ghana. Upon your journey you come across two peacekeeping projects, whose results have been quantified, and you must choose only one given your limited resources. Given the following cash flows answer the problems listed below. Assume a WACC of 16%.
Project A
Project B
0
-1000
-1000
1
400
700
2
400
0
3
400
200
4
400
700
What is each project
Project A
Project B
0
-1000
-1000
1
400
700
2
400
0
3
400
200
4
400
700
Explanation / Answer
Using Function of Excel
Formula = MIRR(Values,finance rate, reinvest rate)
Project A
MIRR =MIRR({-1000,400,400,400,400},16%,16%)
MIRR = 19.31%
Project B
MIRR =MIRR({-1000,700,0,200,700},16%,16%)
MIRR = 19.29%
Decision : You must choose Project A as its MIRR is higher than Project B
Project A Project B 0 -1000 -1000 1 400 700 2 400 0 3 400 200 4 400 700 MIRR = 19.31% 19.29%