Chamberlain Corp. is evaluating a project with the following cash flows: Year Ca

Question

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

Year

Cash Flow

0

–$

15,800

1

6,900

2

8,100

3

7,700

4

6,500

5

–

3,900

Required:

The company uses an interest rate of 9 percent on all of its projects. Calculate the MIRR of the project using all three methods. (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)

MIRR

  Discounting approach

21.815 %

  Reinvestment approach

%

  Combination approach

%

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

Explanation / Answer

Reinvestment approach:

It is assumed that cash flows are reinvested at 21.815% as given

MIRR = ((FV at cost of capital/Initial outlay)^1/n) - 1

FV of cash flows at 21.815% = 45278.8

Thus MIRR = ((45278.8/15800)^(1/5))

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