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Computer Consultants Inc. is considering a project that has the following cash flow and cost of capital (r) data. What is the project's MIRR? Note that a project's MIRR can be less than the cost of capital (and even negative), in which case it will be rejected. r = 10.00% Year 0 1 2 3 Cash flows −$1,000 $450 $450 $450 Select one: a. 9.32% b. 10.35% c. 11.50% d. 12.78% e. 14.20%

Respuesta :

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Answer:

e. 14.20%

Explanation:

We use the formula:

A=P(1+r/100)^n

where

A=future value

P=present value

r=rate of interest

n=time period.

Hence

A=$450(1.1)^2+$450(1.1)^1+$450

=$450[(1.1)^2+(1.1)+1]

=$1489.50

Hence

MIRR=[Future value of inflows/Present value of outflows]^(1/time period)-1

=[1489.5/1000]^(1/3)-1

=14.20%(Approx)

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