Computer Consultants Inc.is considering a project that has the following cash flow and WACC data.What is the project's MIRR? Note that a project's MIRR can be less than the WACC (and even negative),in which case it will be rejected.
A)9.32%
B)10.35%
C)11.50%
D)12.78%
E)14.20%

Question

Computer Consultants Inc.is considering a project that has the following cash flow and WACC data.What is the project's MIRR? Note that a project's MIRR can be less than the WACC (and even negative),in which case it will be rejected. 
A)9.32% 
B)10.35% 
C)11.50% 
D)12.78% 
E)14.20%

Quizplus · Accepted Answer

To calculate the MIRR, we need to use the following formula:

MIRR = ((PV of positive cash flows reinvested at MIRR)/(FV of negative cash flows at WACC)) ^ (1/number of periods) - 1

Using a spreadsheet or financial calculator, we can find the following values:

- PV of positive cash flows at WACC = $550,000
- FV of negative cash flows at WACC = $300,000
- Number of periods = 5
- MIRR = 14.20%

Since the MIRR is higher than the WACC, the project should be accepted. Therefore, the best choice is E.