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# Modified Internal Rate of Return (MIRR)

### MIRR for a Projects Cost of Capital

Consider the following project. 0 1 2 3 4 |----------------|---------------|---------------|---------------| - 1000 300 500 200 300 Pr

### Calculating project's NPV, IRR, MIRR, Payback Period, Discounted Payback Period

Project SS costs \$52,125, its expected net cash flows are \$12,000 per year for 8 years, its WACC is 12%. What is the project's NPV? IRR? MIRR? Payback Period? Discounted Payback Period? (Show calculations)

### The Modified IRR (MIRR) Method

This is a True/ False question. 1)The modified IRR (MIRR) method has wide appeal to professors, but most business executives prefer the NPV method to either the regular or modified IRR. a) True b) False

### Return Compounded Monthly

You want to invest \$5,000 for 3 years. Would you prefer to earn a 6 percent rate of return compounded monthly or a 6 percent rate of return compounded annually? Justify your answer. All else constant, explain why the present value decreases as the discount rate increases.

### Internal Growth - Joes Cookies Company

Joes Cookies Company has total assets of \$1,200, total equity of \$900 and ROA of 15% and a dividend payout ratio of 40%. What is the internal growth rath of Joes Cookie Company? A-6.0% B-7.8% C-9.9% D-11.2% E-20.0%

### Calculations of Key Financial Metrics

Strident Marks is considering purchasing new manufacturing equipment that costs \$1,300,000 and is expected to improve cash flows by \$500,000 in year 1, \$350,000 in year 2, \$475,000 in year 3, \$450,000 in year 4, and \$300,000 in year 5. Calculate key financial metrics for this capital budgeting project. A 14% rate of return an

### IRR and MIRR Calculations

The new project has a cost of \$52,125, its expected net cash inflows are \$12,000 per year for 8 years, and its WACC is 12 percent. What is the project's IRR and MIRR and Discounted Payback?

### Rate of Return

Let us assume that the risk-free rate of interest is 7.3% and that the market risk premium is 14.1%. a) What is the required rate of return on a stock that has a beta of 0.3? b) What is the expected return for the overall stock market?

### Modified internal rate of return

A company's project has expected net cash inflows of \$4,000 per year for seven years. The project has a cost of \$12,200 and the cost of capital is 17%. What's the project's modified internal rate of return?

### Evaluating Cash Flows

Edelman Electric Systems is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. WACC: 10.00% Year: 0 1 2 3 Cash Flows: -\$800 \$350 \$350 \$350 A. 8.62

### Rate of Return.

Rate of Return. Steady As She Goes, Inc., will pay a year-end dividend of \$3 per share. Investors expect the dividend to grow at a rate of 4 percent indefinitely If the stock currently sells for \$30 per share, what is the expected rate of return on the stock? If the expected rate of return on the stock is 16.5 percent, w

### IRR and MIRR

The new project has a cost of \$52,125, its expected net cash inflows are \$12,000 per year for 8 years, and its cost of capital and its cost of capital is 12 percent. What is the project's IRR and MIRR?

### Expected Rate of Return

Calculate the expected return on the portfolio [E ( R )] of the following assets if you invest 20% in asset 1, 30% in asset 2, and 50% in asset 3. How and why will your answer change if you shift 20% of invested funds from the least risky (asset 3) to the most risky (asset 1) asset? Asset Retu

### MIRR, Cash Flow and IRR

I am an investor in a company. We are considering a project which involves opening a new store at a cost of \$10,000,000 at t = 0. The project is expected to have operating cash flows of \$5,000,000 at the end of each of the next 4 years. However, the facility will have to be repaired at a cost of \$6,000,000 at the end of the

### How do the tax rate in the home and the host country affect the decision to use internal debt instead of internal equity?

One stylized fact of multinational corporations is that foreign subsidiaries are capitalized with as little equity as possible and with as much intrafirm debt as possible. a. What are the advantages of internal debt over internal equity in financing a foreign subsidiary? b. How do the tax rate in the home and the host co

### Project Classification, NPV, IRR, and MIRR

1. How is a project classification scheme (for example, replacement, expansion into new markets, and so forth) used in the capital budgeting process? 2. Explain why the NPV of a relatively long-term project, defined as one for which a high percentage of its cash flows are expected in the distant future, is more sensitive to

### Rate of Return for a Stock

How would I calculate the rate of return for this stock? Price beginning of month = \$42 Price end of month = \$45 Dividend received = \$0.25

### Fixed Income Securities, Investment Decision Rules, and Capital Budgeting

3. KC Kincaid just purchased a U.S. Government bond with a 7.5 percent coupon rate and 15 years to maturity. The bond is currently priced to yield 5 percent (i.e., the current price reflects a semiannually compounded yield to maturity of 5 percent). Assuming that all future coupon payments will be reinvested at 6 percent compoun

### Payback Period, Net Present Value, IRR, MIRR

14. Given the following cash flows and a cost of capital of 14%, calculate a. Payback period b. Net Present Value c. Internal Rate of Return d. MIRR. TIME ATCF 0 -160 1 +200 2 + 45 3 +200 4 +100 5 + 50 Should we undertake this project? Why?

### Setting up an Excel Spreadsheet for a Company

I need an example of how to set up an excel spreadsheet to calculate the following: A spreadsheet for a production plant that a company will lease for 5 years at US\$1,500,000 per year; it will cost the firm US\$4,000,000 in capital (straight-line depreciation, 5 year life) in year 0; it will cost the firm an additional US\$150,

### Rate of return-Buying stock on margin Ed Delahanty purchased 500 shares of Niagara Corporation stock on margin at the beginning of the year for \$30 per share. At the end of the year, if Ed sold the Niagara stock for \$40 per share, what would Ed's rate of return be for the year?

Ed Delahanty purchased 500 shares of Niagara Corporation stock on margin at the beginning of the year for \$30 per share. The initial margin requirement was 55%. Ed paid 13% interest on the margin loan and never faced a margin call. Niagara paid dividends of \$1 per share during the year. At the end of the year, if Ed sold the

### Calculate the NPV, IRR, MIRR, and profitability index for this project.

A company is considering a project with a 6-year economic life. The project is expected to cost \$200,000 and have a salvage value of \$30,000. 5 year MACRS depreciation will be used. The company has a 10% cost of capital and a marginal tax rate of 35%. Careful analysis reveals that the company should expect to sell 100,000 to

### Timeline Diagram

Attached is a diagram/table or a form of time line used for a project, which I want to know which program is used to create it or how I can create a similar one. In MIRR, we compound the intermediate cash flows to the terminal year, using the discounting rates. We get attached is the timeline.

### NPV, IRR, MIRR

PRACTICE PROBLEMS 1.Project K has a cost of \$52,125, its expected net cash inflows are \$12,000 per year for 8 years, and its cost of capital is 12 percent. (Hint: Begin by constructing a time line. A. What is the projected payback period (to the closest year)? B. What is the project's discounted payback period? C. What i

### Campbell Company Accounting

10-1 Project K has a cost of \$52,125, its expected net cash inflows are \$12,000 per year for 8 years, and its cost of capitol is 12 percent. ( Begin By constructing a timeline.) a) What is the project's payback period (to the closest year)? b) What is the project's discounted payback period? c) What are the project's NVP?

### Ross chapter 10, Question 10.6 Modified

Ross chapter 10, Question 10.6 Modified 10.6 Suppose the expected returns and standard deviations of stocks A and B are E(RA) = 0.17, E(RB) = 0.27, StdDevA = 0.12, and StdDevB = 0.21, respectively. a. Calculate the expected return and standard deviation of a portfolio that is composed of 35 percent A and 65 percent B when

### Capital Budgeting

#1 - Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this years' capital budget. The projects are independent. The cash outlay for the truck is \$17,100, and that for the pulley system is \$22,430. The firm's cost of capital is 14%. After-tax cash flows including

### Cost and Capital

The lemon juice would be produced in an unused building adjacent to Allied's Fort Myers plant; Allied owns the building, which i fully depreciated. The required equipment would cost \$200,000, plus an additional \$40,000 for shipping and installation. In addition, inventories would rise by \$25,000, while accounts payable would go

### Theory-based questions and short calculations

1a. what is the project's MIRR? b. what is the conceptual difference between the IRR and the MIRR? c. which is better? d. why? 2. suppose a potential customer wants to know the project's profitability index (PI). what is the value of the PI for Hoskins, and what is the rationale behind this measure? 3. under what co

### Calcuation of NPV MIRR IRR and Payback periond

Although he was hired as a financial analyst after completing his MBA, Richard Houston's first assignment at FCS was with the firm's marketing department. Historically, the major focus of FCSs sales effort was on demonstrating the reliability and technological superiority of the firm's product line. However, many of FCS tradit