TL Lumber is evaluating a project with cash flows of - $12,800, $7,400, $11,600, and - $3,200 for Years 0 to 3, respectively. Given an interest rate of 8 percent, what is the MIRR using the discounted approach? Multiple Choice 15.40 percent 14.36 percent 19.23 percent 14.08 percent 13.25 percent

Question

Rogers

Business

16 May, 02:52

TL Lumber is evaluating a project with cash flows of - $12,800, $7,400, $11,600, and - $3,200 for Years 0 to 3, respectively. Given an interest rate of 8 percent, what is the MIRR using the discounted approach? Multiple Choice 15.40 percent 14.36 percent 19.23 percent 14.08 percent 13.25 percent

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Answers (2)

Know the Answer?

Carla Arroyo · Answer 1

Answer:11.82%

Explanation:

Yr C / flow int Amount

1 7400. 1.08^2 8631.

2 11600. 1.08^1. 12,528

3 - 3,200. 1 - 3,200

Total reinvested amount

17959

MIRR=modified internal rate of return=

(17,959/12,800) ^1/3-1

=1.1182-1=0.1182=11.82%

Madilyn · Answer 2

Answer:The answer is 14.36%

Explanation:

In the discounting approach we find the value of all cash flow to time 0 at the discount rate. The cash inflows will remain the same at the time they occur. Therefore, the discounting cash outflow to time 0 we find

MIRR = 0 = (-$12,800 - $3,200/1.08∧3) + 7,400 / (1 + MIRR) + $11,600 / (1 + MIRR) ∧2

Using the trial and error to find the root of the equation, we find that

MIRR = 0.1436 * 100

= 14.36%