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12 August, 12:52

Los Angeles Lumber Company (LALC) is considering a project with a cost of $1,000 at Year 0 and inflows of $300 at the end of Years 1-5. LALC's cost of capital is 10 percent. What is the project's modified IRR (MIRR) ?

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  1. 12 August, 13:01
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    MIRR = 12.9%

    Explanation:

    You can do this on excel using the '=MIRR' function. Enter the following cashflows on excel;

    Initial investment; CF0 = - 1,000

    Year 1 cashflow; C01 = 300

    Year 2 cashflow; C02 = 300

    Year 3 cashflow; C03 = 300

    Year 4 cashflow; C04 = 300

    Year 5 cashflow; C05 = 300

    Rate = 10%

    then type in " = MIRR ", and the function will pop up, select it and highlight all the cells with the above cashflows, use 10% as finance rate & reinvestment rate and press "ENTER". The MIRR would be; 12.9%
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