For the nonconventional net cash flow shown, de­termine the external rate of return using the MIRR method at a borrowing rate of 10% per year and an investment rate of (a) 15% per year, and (b) 30% per year.


Use MIRR function or hand solution.

(a) By hand, with ib = 10% and ii = 15%

PW0 = -7000 – 5000((P/F,10%,3)
= -7000 – 5000((0.7513)
= $-10,757
FW3 = 3000(F/P,15%,2) + 15,000(F/P,15%,1)
= 3000(1.3225) + 15,000(1.1500)
= $21,218

Find i? at which PW0 is equivalent to FW3
-10,757(F/P,i?,3) = 21,218
i' = (21,218/10,757)1/3 -1
= 0.254 (25.4% per year)
(b) By MIRR with ib = 10% and ii = 30%
i' = 31.7% per year

Trades & Technology

You might also like to view...

When animals are weakened, their ____________________ systems do not function properly and the animals sicken more easily

Fill in the blank(s) with correct word

Trades & Technology

Caution is advised when working around lead-acid batteries because the battery may contain ________ gas

A) Hydrogen B) Lead C) Atmospheric D) Carbon

Trades & Technology

Data communication is as dependent upon the rules defined by the OSI model as it is upon the circuits used to connect the devices

Indicate whether the statement is true or false

Trades & Technology

What is the maximum value possible out of a binary counter that has five flip-flops?

A) 25 B) 5 C) 16 D) 32

Trades & Technology