Alyeska Salmon Inc., a large salmon canning firm operating out of Valdez, Alaska, has a new automated production line project it is considering.The project has a cost of $275,000 and is expected to provide after-tax annual cash flows of $73,306 for eight years.The firm's management is uncomfortable with the IRR reinvestment assumption and prefers the modified IRR approach.You have calculated a required rate of return for the firm of 12 percent.What is the project's MIRR?

Question

Quizplus · Accepted Answer

RATIONALE Numerical Solution: 3.27869^1/8 = 1 + MIRR MIRR = 16%. Financial calculator solution: TV Inputs: N = 8; I = 12; PMT = 73,306. Output: FV = -901,641.31. MIRR Inputs: N = 8; PV = -275,000; FV = 901,641.31. Output: I = 16.0%. Alternate method Inputs: = 0; = 73,306; Nj = 8; I = 12. Output: NFV = $901,641.31. Inputs: = -275,000; = 0; Nj = 7; = 901,641.31. Output: IRR = 16.0% = MIRR. .