Tinker Tools, Inc. is considering a project with the following cash flows. Calculate the MIRR of the project assuming a reinvestment rate of 8%
Year Cash Flows
0 ($70,000)
1 ($55,000)
2 $40,000
3 $60,000
4 $100,000
Answer:
PV Cash Outflows
Year 0 = -$70,000
Year 1: Calculator Steps' → N=1, i=8, FV=-55,000, solve for PV = -$50,926
PV Outflows = -$70,000 - $50,926 = -$120,926
FV of Cash Inflows
N=2, i=8, PV=40000, PMT =0, solve for FV = $46,656
N=1, i=8, PV=60000, PMT =0, solve for FV = $64,800
FV of Inflows = $46,656 +$64,800 + $100,000 = $211,456
MIRR: N=4, PV=-$120,926,FV= $211,456 solve for i=15%
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