Ingram Electric Products is considering a project that has the following cash flow and WACC data.
QUESTION
Ingram Electric Products 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: 11.00%Year0123Cash flows-$800$350$350$350
The modified IRR assumes that positive cash flows are reinvested at the firms cost of capital, and the initial outlays are financed at the firms financing cost. Therefore, MIRR more accurately reflects the cost and profitability of a project. The
a for MIRR is: Cash Flows 350 350 350 Future Value 431.24 388.50 350.00 Total Value 1,169.74 PV of Initial Outflows = 800 MIRR = ((1169.74)/800)^(1/3)-1 = 13.50% MIRR is 13.50%
ANSWER:
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