Slow Ride Corp. is evaluating a project with the following cash flows: Calculate

Question

Slow Ride Corp. is evaluating a project with the following cash flows:

  

  

Calculate the MIRR of the project using the discounting approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

  

Calculate the MIRR of the project using the reinvestment approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

Calculate the MIRR of the project using the combination approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

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Slow Ride Corp. is evaluating a project with the following cash flows:   

  

  

Calculate the MIRR of the project using the discounting approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

  

Calculate the MIRR of the project using the reinvestment approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

Calculate the MIRR of the project using the combination approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

Year Cash Flow 0 –$ 28,800 1 11,000 2 13,700 3 15,600 4 12,700 5 – 9,200

Explanation / Answer

discountrate(= r) 10% Discounting method Year Cash Flow Cash Flow(CF) 0 -28,800 -34512.4762 1 11,000 11,000 2 13,700 13,700 3 15,600 15,600 4 12,700 12,700 5 -9,200 0 MIRR 18.99% (MIRR=IRR(above Cashflows CF yr0-5) Present value of all negative cash flows -34512.4762 (=-28800-9200/(1+r)^5) at discounted MIRR,NPV=0 NPV=-28800-9200/1.11^5 + 11000/(1+MIRR)+13700/(1+MIRR)^2+ 15600/(1+MIRR)^3+12700/(1+MIRR)^4=0 For MIRR=18.99%,NPV=0 Reinvestmentrate 10% Reinvestment method Year Cash Flow Future Value of Cash Flow yr1-5 0 -28,800 (FVt=CashFlow*(1+Reinvestmentrate)^(5-Year)) 1 11,000 16105.1 2 13,700 18234.7 3 15,600 18876 4 12,700 13970 5 -9,200 -9200 Total Future Value(FV) 57985.8 (=sum above FVts) Investment(Inv) -28,800 MIRR=(FV/-Inv)^(1/5)-1 15.02% discountrate( r) 10% Reinvestmentrate( R) 10% Combination method PV-(PV of -ve cash flows) FV+(FV of +ve cash flows) Year(t) Cash Flow(CF) (=IF(CF0,CF*(1+R)^(5-t),"") 0 -28,800 -28800 1 11,000 16105.1 2 13,700 18234.7 3 15,600 18876 4 12,700 13970 5 -9,200 -5712.476172 Total -34512.47617 67185.8 (=PVT-) (=FVT+) MIRR=(FVT+/-PVT-)^(1/5)-1 14.25% MIRR(CFs yr 0-5,r,R) 14.25% discountrate(= r) 11% Discounting method Year Cash Flow Cash Flow(CF) 0 -28,500 -33781.7168 1 10,700 10,700 2 13,400 13,400 3 15,300 15,300 4 12,400 12,400 5 -8,900 0 MIRR 18.90% (MIRR=IRR(above Cashflows CF yr0-5) Present value of all negative cash flows -33781.7168 (=-28500-8900/(1+r)^5) at discounted MIRR,NPV=0 NPV=-28500-8900/1.11^5 + 10700/(1+MIRR)+13400/(1+MIRR)^2+ 15300/(1+MIRR)^3+12400/(1+MIRR)^4=0 For MIRR=18.90%,NPV=0 Reinvestmentrate 8% Reinvestment method Year Cash Flow Future Value of Cash Flow yr1-5 0 -28,500 (FVt=CashFlow*(1+Reinvestmentrate)^(5-Year)) 1 10,700 14557.23187 2 13,400 16880.1408 3 15,300 17845.92 4 12,400 13392 5 -8,900 -8900 Total Future Value(FV) 53775.29267 (=sum above FVts) Investment(Inv) -28,500 MIRR=(FV/-Inv)^(1/5)-1 13.54% discountrate( r) 11% Reinvestmentrate( R) 8% Combination method PV-(PV of -ve cash flows) FV+(FV of +ve cash flows) Year(t) Cash Flow(CF) (=IF(CF0,CF*(1+R)^(5-t),"") 0 -28,500 -28500 1 10,700 14557.23187 2 13,400 16880.1408 3 15,300 17845.92 4 12,400 13392 5 -8,900 -5281.71682 Total -33781.71682 62675.29267 (=PVT-) (=FVT+) MIRR=(FVT+/-PVT-)^(1/5)-1 13.16% MIRR(CFs yr 0-5,r,R) 13.16%

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