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:
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 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).)
Year Combination
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%