Homework SourseCalculate the MIRR of the project using the discounting appr
Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
| RAK Corp. is evaluating a project with the following cash flows: |
Solution
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| Year (MIRR at Discount rate) | 0 | 1 | 2 | 3 | 4 | 5 | ||||
| -28,600 | 10800 | 13500 | 15400 | 12500 | -9000 | |||||
| Discount rate | 13% | |||||||||
| PV factor | 1 | 0.54276 | PV factor=1/(1+r)^n | |||||||
| PV of Cash Outflows | -28,600 | -4884.84 | PV cash flow = Cash flow * Pv factor | |||||||
| Total PV | -33,485 | |||||||||
| FV factor | 1.630474 | 1.442897 | 1.2769 | 1.13 | FV factor =(1+r)^(5-n) | |||||
| FV of Cash Inflows | 17609.11 | 19479.11 | 19664.26 | 14125 | Fv cash flow Cash flow * FV factor | |||||
| Total FV | 70877.48449 | |||||||||
| MIRR=(Total FV/-Total PV)^(1/5)-1 | 16.18% | |||||||||
| Year (MIRR at Reinvest rate) | 0 | 1 | 2 | 3 | 4 | 5 | ||||
| -28,600 | 10800 | 13500 | 15400 | 12500 | -9000 | |||||
| Reinvestment rate | 6% | |||||||||
| PV factor | 1 | 0.747258 | PV factor=1/(1+r)^n | |||||||
| PV of Cash Outflows | -28,600 | -6725.32 | PV cash flow = Cash flow * Pv factor | |||||||
| Total PV | -35,325 | |||||||||
| FV factor | 1.262477 | 1.191016 | 1.1236 | 1.06 | FV factor =(1+r)^(5-n) | |||||
| FV of Cash Inflows | 13634.75 | 16078.72 | 17303.44 | 13250 | Fv cash flow Cash flow * FV factor | |||||
| Total FV | 60266.90717 | |||||||||
| MIRR=(Total FV/-Total PV)^(1/5)-1 | 11.28% | |||||||||
| Year (MIRR at Combination) | 0 | 1 | 2 | 3 | 4 | 5 | ||||
| -28,600 | 10800 | 13500 | 15400 | 12500 | -9000 | |||||
| Discount rate | 13% | |||||||||
| PV factor at discount rate | 1 | 0.54276 | PV factor=1/(1+ discount)^n | |||||||
| PV of Cash Outflows | -28,600 | -4884.84 | PV cash flow = Cash flow * Pv factor | |||||||
| Total PV | -33,485 | |||||||||
| Reinvestment rate | 6% | |||||||||
| FV factor at reinvestment rate | 1.262477 | 1.191016 | 1.1236 | 1.06 | FV factor =(1+reinvetsment)^(5-n) | |||||
| FV of Cash Inflows | 13634.75 | 16078.72 | 17303.44 | 13250 | Fv cash flow Cash flow * FV factor | |||||
| Total FV | 60266.90717 | |||||||||
| MIRR=(Total FV at reinvestment rate /-Total PV at discount rate)^(1/5)-1 | 12.47% |
