A CFO is considering a project that has the following cash flow and WACC data. W

Question

A CFO is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. The firm%u2019s WACC is 10%.  

Project A                   

Year                 Cash Flow                 

0                    -$800                       

1                         350                       

2                         350                       

3                         350

Explanation / Answer

PV = 800(1.1)^3

=1064.8

and NPV for the profit=

350(1.1)^2+350*1.1+350

=1158.5

so the project will be accepted as NPV is more than the cost

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