Finance MIRR calculation: Emily\'s Soccer Mania is considerig building a new pla

Question

Finance MIRR calculation: Emily's Soccer Mania is considerig building a new plant. This project would require an initial cash outlay of $11 million and would generate annual cash inflows of $2 million per year for years one through four. In year five the project will require an investment outla of $4.5 million. During years 6 through 10 the project will provide cash inflows of $4.5 million per year. Calculate the project's MIRR, given a discount rate of 10 percent.

The MIRR of the project with a discount rate of 10% is___?

Explanation / Answer

Future value of positive cash flows= 2*1.1^9 + 2*1.1^8 + 2*1.1^7 + 2*1.1^6 + 4.5*1.1^4 + 4.5*1.1^3 + 4.5*1.1^2 + 4.5*1.1^1 + 4.5*1.1^0=43.91658 million

Present value of negative cash flows = 11 + 4.5/1.1^5=13.794146

MIRR =( 43.91658/13.794146)^(1/10)-1= 12.28%

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