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Open PPT 11-23 Calculating MIRR, which shows the procedure on how to calculate MIRR for...

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Accounting

Open PPT 11-23 Calculating MIRR, which shows the procedure on how to calculate MIRR for Project L. Review and study this slide thoroughly for complete understanding and then answer the following

Qs: Calculate now MIRR for Project S [use the data shown at PPT 11-8]. Assume WACC=10%, what are your decisions about Project L and Project S if they are independent projects, and if you are using the MIRR method to make your decision. Explain the reason why as well. Assume WACC=10%, what are your decisions about Project L and Project S if they are mutually exclusive projects, and if you are using the MIRR method to make your decision. Explain the reason why as well.

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Example Projects we'll examine: Cash Flow Year ACE -100 -60 W NA O 60 10 ACF is the difference between CF, and CFs. We'll use ACF later. 11-8 Calculating MIRR o 100% un 1 2 3 -100.0 10.0 60.0 10% 10% 80.0 66.0 12.1 158.1 TV inflows MIRR = 16.5% -100.0 PV outflows $100 $158.1 (1 + MIRR)3 MIRR, = 16.5% Excel: =MIRR(CF:CFn,Finance_rate, Reinvest_rate) We assume that both rates = WACC. 11-23

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