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Elliott Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$ 20,000 1 8,000 2 8,800 3 9,300 4 6,500 5 – 6,000 Requirement 1: The company uses an...

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Finance

Elliott Corp. is evaluating a project with the following cashflows:
YearCash Flow
0–$20,000
18,000
28,800
39,300
46,500
5–6,000
Requirement 1:
The company uses an interest rate of 9 percent on all of itsprojects. In the table below, show the modified cash flows andcalculate the modified internal rate of return (MIRR) using the"combination" approach. (Do not round intermediatecalculations. Negative amounts should be indicated with a minussign. Round your answers to 2 decimal places (e.g.,32.16).)
YearCombination
Approach
0$
1$
2$
3$
4$
5$
MIRR%

Answer & Explanation Solved by verified expert
4.0 Ratings (468 Votes)

Present value of net cash outflows:
Initial $ 20,000.00
Year 5 6000/1.09^5 $    3,899.59
$ 23,899.59
Year Cash Flow FV at 9% Future Value
1 8000            1.4116        11,292.65
2 8800            1.2950        11,396.26
3 9300            1.1881        11,049.33
4 6500            1.0900          7,085.00
Total FV of net cash inflows        40,823.24
MIRR = (FV of net cash inflows/PV of net cash outflows)^(1/n)-1
MIRR = (40823.24/23899.59)^(1/5)-1
MIRR = 11.30%

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Transcribed Image Text

Elliott Corp. is evaluating a project with the following cashflows:YearCash Flow0–$20,00018,00028,80039,30046,5005–6,000Requirement 1:The company uses an interest rate of 9 percent on all of itsprojects. In the table below, show the modified cash flows andcalculate the modified internal rate of return (MIRR) using the"combination" approach. (Do not round intermediatecalculations. Negative amounts should be indicated with a minussign. Round your answers to 2 decimal places (e.g.,32.16).)YearCombinationApproach0$1$2$3$4$5$MIRR%

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