Question

ehrmann data systems is considering a project that has the following cash flow and wacc data. what is the project's mirr? note that a project's projected mirr can be less than the wacc (and even negative), in which case it will be rejected. wacc: 9.75% year 0 1 2 3 cash flows -$1,000 $450 $450 $450 a. 14.11% b. 15.81% c. 17.22% d. 15.52% e. 10.72%

Answer 1

The project's MIRR can be calculated using the cash flows and WACC. In this case, the MIRR is approximately 15.81%.

Step-by-step explanation:

The Modified Internal Rate of Return (MIRR) is a financial metric used to calculate the rate of return of an investment project. To calculate the MIRR, you need to first determine the future value of the positive cash flows at the end of the project's life and the present value of the negative initial investment. In this case, the project has cash flows of -$1,000 at Year 0 and $450 in Years 1, 2, and 3.

Using the WACC of 9.75% as the discount rate, you can calculate the project's MIRR by finding the rate at which the sum of the present values of all the cash flows equals zero. By using trial and error or a financial calculator, you will find that the project's MIRR is approximately 15.81%.