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Slow Ride Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$13,200               1 5,900               2 6,600               3 6,300               4 5,200               5 –5,700               The company uses a...

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Finance

Slow Ride Corp. is evaluating a project with the following cashflows:
YearCash Flow
0–$13,200             
15,900             
26,600             
36,300             
45,200             
5–5,700             

The company uses a 11 percent discount rate and an 8 percentreinvestment rate on all of its projects. Calculate the MIRR of theproject using all three methods using these interest rates.

Required:
(a)MIRR using the discounting approach.
(Click to select)17.31%16.12%15.46%17.82%16.97%

  

(b)MIRR using the reinvestment approach.
(Click to select)11.71%12.95%14.36%12.33%12.58%
(c)MIRR using the combination approach.
(Click to select)12.3%11.46%12.66%13.04%12.06%

Answer & Explanation Solved by verified expert
3.7 Ratings (565 Votes)
a Discounting Approach All negative cash flows are discounted back to the present at the required return and added to the initial cost Thus year 0 modified cash flow13200338267 1658267 Year 0 1 2 3 4 5 Cash flow stream 13200000 5900000 6600000 6300000 5200000 5700000 Discounting factor Using discount rate 1000 1110 1232 1368 1518 1685 Discounted cash flows 13200000 5315315 5356708 4606506 3425401 3382673 Modified cash flow 16582673 5900000 6600000 6300000 5200000 0000 Discounting factor using MIRR 1000 1170 1368 1600 1872 2190    See Answer
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Transcribed Image Text

Slow Ride Corp. is evaluating a project with the following cashflows:YearCash Flow0–$13,200             15,900             26,600             36,300             45,200             5–5,700             The company uses a 11 percent discount rate and an 8 percentreinvestment rate on all of its projects. Calculate the MIRR of theproject using all three methods using these interest rates.Required:(a)MIRR using the discounting approach.(Click to select)17.31%16.12%15.46%17.82%16.97%  (b)MIRR using the reinvestment approach.(Click to select)11.71%12.95%14.36%12.33%12.58%(c)MIRR using the combination approach.(Click to select)12.3%11.46%12.66%13.04%12.06%

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