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

Discounting approach

PV of all positive cashflow = PV of all negative cashflow

$11,400/(1+MIRR) + $14,100/(1+MIRR)2 + $16,000/(1+MIRR)3 + $13,100/(1+MIRR)4 = $29,200 + 9,600/(1+9%)5

Solving equation we get: MIRR 19.18%

Reinvestment approach
At time t=5,

Cashflow = $11,400x(1+9%)4 + $14,100x(1+9%)3 + $16,000x(1+9%)2 + $13,100x(1+9%) - $9,600x(1+9%)0

   = $58,040.54

Again, 0 = -$29,200 + $58,040.54/(1+MIRR)5

Solving equation we get: MIRR 14.73%

Combination approach
At time t=5,

Cashflow = $11,400x(1+9%)4 + $14,100x(1+9%)3 + $16,000x(1+9%)2 + $13,100x(1+9%)

= $67,640.54
At time t=0

Cashflow = - $29,2000 - $9,600/(1+9%)5 = -$35,439.34

Now, 0 = -$35,439.34 + $67,640.54/(1+MIRR)5

Solving equation we get: MIRR 13.80%

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