Capitol City Transfer Company is considering building a new terminal in Johannesburg.If the company goes ahead with the project, it must spend R1 million immediately (at t = 0) and another R1 million at the end of Year 1 (t = 1).It will then receive net cash flows of R0.5 million at the end of Years 2-5, and it expects to sell the property and net R1 million at the end of Year 6.All cash inflows and outflows are after taxes.The company's required rate of return is 12 percent, and it uses the modified IRR criterion for capital budgeting decisions.What is the project's modified IRR (MIRR)?

Question

Quizplus · Accepted Answer

The MIRR is calculated by finding the future value of cash inflows at the required rate of return and the present value of cash outflows, then solving for the rate that equates these values. The MIRR for this project is approximately 11.7%.

Capitol City Transfer Company Is Considering Building a New Terminal