Question

Wiley's Wire Products is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's MIRR can be less than the WACC (and even negative), in which case it will be rejected. WACC: 11.00% Year 0 1 2 3 Cash flows -$800 $350 $350 $350 Select one:
a. 8.86%
b. 9.84%
c. 10.94%
d. 12.15%
e. 13.50%

Answer 1

Answer:

e. 13.50%

Explanation:

WACC                11.00%

Year                        0              1                  2                   3  

Cash flows          $800        $350           $350          $350

Compounded-

values, FVs        $431.24     $388.50     $350.00

TV = Sum of compounded inflows: $1,169.74

MIRR = 13.50% Found as discount rate that equates PV of TV to cost, discounted back 3 years @ WACCMIRR= 13.50%.