Share
Explore BrainMass

MIRR

Alyeska Salmon Inc., a large salmon canning firm operating out of Valdez, Alaska, has a new automated production line project it is considering. The project has a cost of $275,000 and is expected to provide after-tax annual cash flow of $73,306 for eight years. The firm's management is uncomfortable with the IRR reinvestment assumption and prefers the modified IRR approach. You have calculated a cost of capital for the firm of 12%. What is the project's MIRR?

Please give step to step explanation for the answer.

Attachments

Solution Preview

Please see the attached file.

Alyeska Salmon Inc., a large salmon canning firm operating out of Valdez, Alaska, has a new automated production line project it is considering. The project has a cost of $275,000 and is expected to provide after-tax annual cash flow of $73,306 for eight years. The firm's management is uncomfortable with the IRR reinvestment assumption and prefers the modified IRR approach. You have calculated a cost of capital for the firm of 12%. What is the project's MIRR?

Please give step to step explanation for the answer.

In MIRR calculations, the intermediate cash flows are manually compounded to the terminal and year and then the IRR is found. In this example, the ...

Solution Summary

The solution explains how to calculate the Modified Internal Rate of Return (MIRR)

$2.19