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Modified Internal Rate of Return (MIRR)

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I am considering the following project. The project has an up-front cost and will also generate the following subsequent cash flows:

t=1 $400, t=2 $500, t=3 $200

The project's payback is 1.5 years, and it has a cost of capital of 10 percent.

What is the project's modified internal rate of return (MIRR)?

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Solution Summary

Calculates Modified Internal Rate of Return (MIRR) for a project.

Solution Preview

See attached Excel worksheet.

Step 1: Calculate the initial up front cost

payback period= 1.5 years
Therefore upfront cost= Year 1 cash flow + 0.5 x Year 2 cash flow= $650 =400+0.5*500

Thus the cash flow ...

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