   Chapter 11, Problem 21P Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

Solutions

Chapter
Section Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

MIRR Project X costs \$1,000, and its cash flows arc the same in Years 1 through 10. Its IRR is 12%, and its WACC is 10%. What is the project’s MIRR?

Summary Introduction

To calculate: MIRR of the given project.

Modified Internal Rate of Return (MIRR):

It refers to the rate of return that is computed by the company to make a decision of selection and ranking of a project for investment. This is a modified version of IRR with reinvestment of cash flows at the cost of capital.

Explanation

Given,

Cost of the project is \$1,000.

Life of the project is 10 years.

IRR of the project is 12%.

Cost of capital of the project is 10%.

Table (1)

Cash inflow per year is \$176...

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