Mass Company is investing in a giant crane.It is expected to cost $6.0 million in initial investment,and it is expected to generate an end-of-year cash flow of $3.0 million each year for three years.At the end of the fourth year,there will be a $1.0 million disposal cost.Calculate the MIRR for the project if the cost of capital is 12%.
A)17.8%
B)15.3%
C)23.8%

Question

Quizplus · Accepted Answer

The MIRR is calculated by finding the future value of cash inflows at the cost of capital, subtracting the future value of the disposal cost, and then finding the rate that equates this net future value to the initial investment. The MIRR for this project is approximately 17.8%.

Mass Company Is Investing in a Giant Crane