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

Calculation of MIRR using discounting approach Interst rate = 9% Year Cash Flow Adjusted value Modified cash flow 0 -28600 -5849.382477 -34449.38248 1 10800 10800 2 13500 13500 3 15400 15400 4 12500 12500 5 -9000 0 Adjusted value of negative cash flow in year 5 = -9000/1.09^5 -5849.38 Let r = 18%, then net Present Value will be NPV = =-34449.38248 + 10800/1.18 + 13500/1.18^2 + 15400/1.18^3+12500/1.18^4 NPV = 218.9261 Let r = 19%, then Net Present value will be NPV = =-34449.38248 + 10800/1.19 + 13500/1.19^2 + 15400/1.19^3+12500/1.19^4 NPV = -468.564 r = 0.18 + [218.9261 * (0.18-0.19)/(-468.564-218.9261) =0.18 + 0.0031844 = 0.18318 MIRR = 18.32% Calculation of MIRR using investment approach Interst rate = 9% Year Cash Flow Adjusted value Modified cash flow 0 -28600 -28600 1 10800 0 2 13500 0 3 15400 0 4 12500 0 5 -9000 64649.71289 55649.71289 Adjusted value of positive cash flows year cash flow FV factor at 9% Future value 1 10800 1.41158161 15245.08139 2 13500 1.295029 17482.8915 3 15400 1.1881 18296.74 4 12500 1.09 13625 Total Future Value 64649.71289 At MIRR NPV = 0. That is 0 = -28600 + 55649.71289/(1+r)^5 28600 = 55649.71289/(1+r)^5 ==> (1+r)^5 = 55649.71289/28600 ==> (1+r)^5 = 1.945794 1+r   = 1.945794^1/5 ==> 1+r = 1.142403116 r = =1.142403116-1 0.142403116 or 14.24% MIRR = 14.24% Calculation of MIRR using combined approach Interst rate = 9% Year Cash Flow Adjusted value Modified cash flow 0 -28600 -5849.382477 -34449.38248 1 10800 0 2 13500 0 3 15400 0 4 12500 0 5 -9000 64649.71289 64649.71289 Adjusted value of negative cash flow in year 5 = -9000/1.09^5 -5849.38 Adjusted value of positive cash flows year cash flow FV factor at 9% Future value 1 10800 1.41158161 15245.08139 2 13500 1.295029 17482.8915 3 15400 1.1881 18296.74 4 12500 1.09 13625 Total Future Value 64649.71289 At MIRR, NPV = 0 -34449.38248 + 64649.71289/(1+r)^5   = 0 64649.71289/(1+r)^5   = 34449.38248 (1+r)^5 = 64649.71289/34449.38248 1.876658106 1+r   = =1.876658106^(1/5) 1.134167065 r = =1.134167065 - 1 0.134167065 or 13.42% MIRR = 13.42%

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