Problem 12-3 MIRR A project has an initial cost of $40,675, expected net cash in
ID: 2784674 • Letter: P
Question
Problem 12-3 MIRR A project has an initial cost of $40,675, expected net cash inflows of $10,000 per year for 11 years, and a cost of capital of 10%. What is the project's MIRR? Round your answer to two decimal places. Problem 12-3 MIRR A project has an initial cost of $40,675, expected net cash inflows of $10,000 per year for 11 years, and a cost of capital of 10%. What is the project's MIRR? Round your answer to two decimal places. Problem 12-3 MIRR A project has an initial cost of $40,675, expected net cash inflows of $10,000 per year for 11 years, and a cost of capital of 10%. What is the project's MIRR? Round your answer to two decimal places.Explanation / Answer
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
A=$10,000(1.1)^10+10,000(1.1)^9+10,000(1.1)^8+............+10,000(1.1)^1+10000
=$185311.6706
MIRR=[Future value of inflows/Present value of outflows]^(1/time period)-1
=[185311.6706/40675]^(1/11)-1
=14.78%(Approx).