Question

Jamaica Corp. is adding a new assembly line at a cost of $8.5 million. The firm expects the project to generate cash flows of $2 million, $3 million, $4 million, and $5 million over the next four years. Its cost of capital is 16 percent. What is the MIRR on this project? (Round to the nearest percent.)

A) 18%
B) 19%
C) 20%
D) 21%

Answer 1

The MIRR on this project is approximately b. 19%.

Step-by-step explanation:

To calculate the MIRR on a project, we need to find the present value of the cash inflows and outflows and then determine the rate of return that makes the net present value (NPV) equal to zero. In this case, the cash flows are $2 million, $3 million, $4 million, and $5 million over the next four years, and the cost of capital is 16%.

By using the MIRR formula, we can find that the MIRR on this project is approximately b. 19%.