Calculate the MIRR of the project using the discounting approach method. (Do not

Question

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))

Explanation / Answer

1) Discounting Approach :

            Discounting cash flow to time 0 ,

Time 0 Cash flow = -28600-9000 /1.09^5 = -34449

MIRR = -34449 + 10800 /(1+MIRR) +13500/(1+MIRR)^2 +15400/(1+MIRR)^3+12500/(1+MIRR)^4

Using Spreadsheet ,

MIRR = 18.32%

2)Reinvestment approach

Time 5 cash flow = 10800 /(1.09)^4 +13500/(1.09)^3 +15400/(1.09)^2+12500/(1.09)-9000= 33505

MIRR using discounting approach

0 = -28600 + 33505(1+MIRR)^5

MIRR = (33505/28600)^(1/5)-1

MIRR = 3.21%

3)combination Approach

Time 0 Cash flow = -28600-9000 /1.09^5 = -34449

Time 5 cash flow = 10800 /(1.09)^4 +13500/(1.09)^3 +15400/(1.09)^2+12500/(1.09)=42505.23

MIRR using discounting approach

0 = -34449 + 42505(1+MIRR)^5

MIRR = (34449/42505)^(1/5)-1

MIRR = -4.12%

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