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

Question

Quizplus · Accepted Answer

Step 1 - Find the PV of all cash outflows.
The initial investment is the only outflow, so PV = -1,000.
Step 2 - Find the FV of all cash inflows.
FV = PMT 11ea7fdb_fbea_19b6_a768_b3848d431d7a_TB2902_11 FV = 300 11ea7fdb_fbea_19b7_a768_a9a2f4b1899d_TB2902_11 = $1,831.53
Step 3 - Use a financial calculator to solve for the interest rate.
N = 5, PV = -1,000, PMT = 0, FV = 1,831.53, CPT I/Y = 12.9%

Los Angeles Lumber Company (LALC)is Considering a Project with a Cost