Ehrmann Data Systems is considering a project that has the following c

QUESTION

Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What is the projects MIRR? Note that a projects projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.WACC: 8.75%YearCash flows0..($1,000)1..$4502..$4503..$4501. 12.23%2. 16.90%3. 11.41%4. 13.74%5. 14.16%
Future Value of Terminal Value Year Cashflows Future factor@ 8.75% Discounted Amount 1 $ 450 1 $ 450.00 2 $ 450 1.0875 $ 489.38 3 $ 450 1.1827 $ 532.20 (1.0875*1.0875) $ 1,471.57 Answer: Option 4:¦

.74 % MIRR=(Future Value of Terminal Value/Present Value of Cash Outflows)^1/n “ 1 MIRR = ($ 1,471.57/$ 1,000)^1/3 “ 1 MIRR = 13.74 %

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