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Take a Test-Patrick Quigley Secure | https://www.mathxl.com/Student/PlayerTest.aspx?testid=172973966&centeninayes; FINC 300 (01): Fall 2017 Test:Exam 2 Submit Test This Question: 4 pts 24 of 30 (4 complete) his Test 100 pts possi Question Help | * (Related to Checkpoint 11.6) (MIRR calculation) Emily's Soccer Mania is considering building a new plant. This project would require an initial cash outlay of $11 million and would generate annual cash inflows of $2.5 million per year for years one through four. In year five the project will require an investment outlay of $5.5 million. During years 6 through 10 the project will provide cash inflows of $5.5 million per year. Calculate the project's MIRR, given a discount rate of 12 percent. The MIRR of the project with a discount rate of 12% is 1% (Round to two decimal places.) Enter your answer in the answer box 13

Explanation / Answer

Present Value of Outflows @ 12%:

Year

Outflow

Factor

Presnet Value

0

11000000

1

11000000

5

5500000

0.567

3118500

14118500

Future value of Inflows at 12%:

year

Inflow

Working

Future Value

1

2500000

2.7731

6932750

2

2500000

2.476

6190000

3

2500000

2.211

5527500

4

2500000

1.9738

4934500

6

5500000

1.5735

8654250

7

5500000

1.4049

7726950

8

5500000

1.2544

6899200

9

5500000

1.12

6160000

10

5500000

1

5500000

58525150

MIRR = Cube route of (Future value of inflow/PV of outflow) – 1

           = (Cube route of 58525150/14118500)-1

           = 60.64%

Year

Outflow

Factor

Presnet Value

0

11000000

1

11000000

5

5500000

0.567

3118500

14118500

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