Slow Ride Corp. is evaluating a project with the following cash flows Year Cash

Question

Slow Ride Corp. is evaluating a project with the following cash flows Year Cash Flow 0 -$29,000 11,200 13,900 15,800 12,900 -9,400 2 4 5 The company uses an 11 percent discount rate and an 8 percent reinvestment rate on all of its projects 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)) MIRR 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)) MIRR 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)) MIRR 0 0

Explanation / Answer

Discounting approach:

year 0: -29000-9400/1.11^5=-34578.4

year 1: 11200

year 2: 13900

year 3: 15800

year 4: 12900

year 5: 0

So, 0=-34578.4+11200/(1+MIRR)+13900/(1+MIRR)^2+15800/(1+MIRR)^3+12900/(1+MIRR)^4

MIRR=19.6642%

Reinvestment method:

year 0: -29000

year 1: 0

year 2: 0

year 3: 0

year 4: 0

year 5: 12900*1.08+15800*1.08^2+13900*1.08^3+11200*1.08^4-9400=55708.59

0=-29000+55708.59/(1+MIRR)^5

MIRR=13.9475%

Combination Method:

year 0: -29000-9400/1.11^5=-34578.4

year 1: 0

year 2: 0

year 3: 0

year 4: 0

year 5: 12900*1.08+15800*1.08^2+13900*1.08^3+11200*1.08^4=65108.59

0=-34578.4+65108.59/(1+MIRR)^5

MIRR=13.4924%

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