Youre evaluating a project with the following cash flows ini

You\'re evaluating a project with the following cash flows: initial investment is $124 million dollars, and cash flows for years 1-3 are $10, $61 and $78 million dollars, respectively. The firm\'s WACC is 10%. What is this project\'s MIRR?

Solution

Year Cash Flow FV @ 10% Future Value 1 $10.00 1.2100 $12.10 2 $61.00 1.1000 $67.10 3 $78.00 1.0000 $78.00 (Future Value of Positive Cash Flows at the Cost Of Capital of the Firm $157.20 Present Value of all Negative Cash Flows at the Financing Cost of the Firm = $124/(1.10)^0 $124.00 MIRR = (Future Value of Positive Cash Flows at the Cost Of Capital of the Firm / Present Value of all Negative Cash Flows at the Financing Cost of the Firm)^(1/n) – 1 MIRR = (($157.20/$124)^(1/3))-1 8.23%