Ingram Electric Products is considering a project that has the following cash flow and WACC data.What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative),in which case it will be rejected.
A)8.86%
B)9.84%
C)10.94%
D)12.15%
E)13.50%

Question

Ingram Electric Products is considering a project that has the following cash flow and WACC data.What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative),in which case it will be rejected. 
A)8.86% 
B)9.84% 
C)10.94% 
D)12.15% 
E)13.50%

Quizplus · Accepted Answer

The MIRR of the project can be found using the formula: MIRR = (FV of positive cash flows at reinvestment rate - PV of negative cash flows at finance rate)^(1/n) - 1. 
Plugging in the values, we get:
MIRR = (1735.5*(1.1)^5 - 1300)/(1300*(1.1)^5)^(1/5) - 1
MIRR = 0.1350 or 13.50%
Since the MIRR is greater than the WACC of 10%, the project should be accepted. Therefore, the best choice is E.

Ingram Electric Products Is Considering a Project That Has the Following