Calculating the project's MIRR
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A project that I am working on has a cost of $275,000 and is expected to provide after-tax annual cash flows of $73,306 for eight years. The firm's management is uncomfortable with the IRR reinvestment assumption and prefers the modified IRR approach. I calculated a cost of capital for the firm of 12 percent. What is the project's MIRR?
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Solution Summary
This solution calculates a project's MIRR given the cost, cash flows, reinvestment assumption,cost of capital and IRR approach.
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While the internal rate of return (IRR) assumes the cash flows from a project are reinvested at the IRR, the modified IRR assumes that all cash flows are reinvested at the firm's cost of capital. ...
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