Compute the MIRR statistic for Project J if the appropriate cost
of capital is 10 percent....
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Finance
Compute the MIRR statistic for Project J if the appropriate costof capital is 10 percent. (Do not round intermediatecalculations and round your final answer to 2 decimalplaces.)
Project J
Time:
0
1
2
3
4
5
Cash flow:
?$1,000
$350
$1,480
?$520
$300
?$100
MIRR ______ %
Should the project be accepted or rejected?
Answer & Explanation
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Computation of MIRR
Year
Cash
flow
0
(1,000)
1
350
2
1,480
3
(520)
4
300
5
(100)
we have
to first compute the future value of the cash flow from year 1 to
5
Year
Cash
flow
Future
value
1
350
512.44
=350*(1+10%)^4
2
1,480
1,969.88
=1480*(1+10%)^3
3
(520)
(629.20)
=-520*(1+10%)^2
4
300
3,300.00
=3000*(1+10%)
5
(100)
(100.00)
-100
future
value =
5,053.12
now we
have to use financial calculator to compute the MIRR
Put in
calcluator
PV
-1000
PMT
0
FV
5,053.12
N
5
Compute
I
38.26%
therefore
MIRR =
38.26%
Project
should be ACCEPTED.
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