Question

Problem 5-20 mirr duo corporation is evaluating a project with the following cash flows: yearcash flow 0−$ 29,200 111,400 214,100 316,000 413,100 5−9,600 the company uses an interest rate of 9 percent on all of its projects. calculate the mirr of the project using the discounting approach. (do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) calculate the mirr of the project using the reinvestment approach. (do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) calculate the mirr of the project using the combination approach. (do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

To calculate the Modified Internal Rate of Return (MIRR), there are three approaches that can be used: discounting, reinvestment, and combination. Each approach involves finding the present value of cash inflows and future value of cash outflows, and then using a specific formula to calculate the MIRR.

Step-by-step explanation:

To calculate the Modified Internal Rate of Return (MIRR) using the discounting approach, we need to find the present value of the cash inflows and the future value of the cash outflows. The discount factor is calculated using the interest rate of 9%. Once we have the present value of the cash inflows and the future value of the cash outflows, we can calculate the MIRR using the formula:

MIRR = (Future Value of Cash Outflows / Present Value of Cash Inflows)^(1/Number of Periods) - 1

Similarly, to calculate the MIRR using the reinvestment approach, we need to find the future value of the cash inflows and the present value of the cash outflows. The reinvestment rate is the interest rate of 9%. Once we have the future value of the cash inflows and the present value of the cash outflows, we can calculate the MIRR using the same formula as before.

To calculate the MIRR using the combination approach, we use a combination of the discounting and reinvestment approaches. We find the present value of the cash inflows and the future value of the cash outflows, and then calculate the MIRR using the formula mentioned earlier.