Westwood Painting Co. is considering a project that has the following cash flow and cost of capital (r) data. What is the project's MIRR? Note that a project's MIRR can be less than the cost of capital (and even negative), in which case it will be rejected.
A) 13.42%
B) 14.91%
C) 16.56%
D) 18.22%
E) 20.04%

Question

Westwood Painting Co. is considering a project that has the following cash flow and cost of capital (r) data. What is the project's MIRR? Note that a project's MIRR can be less than the cost of capital (and even negative), in which case it will be rejected. 
A) 13.42% 
B) 14.91% 
C) 16.56% 
D) 18.22% 
E) 20.04%

Quizplus · Accepted Answer

To calculate the MIRR, we need to find the future value of all cash inflows at the reinvestment rate that makes the net present value of all cash outflows equal to zero ($0). We can use trial and error or Excel's MIRR function to find that the reinvestment rate is approximately 15.79%. With this reinvestment rate, we can calculate the future value of all cash inflows, which is $513,716.37. Then, we can solve for the MIRR that makes the present value of the ending cash flow equal to zero, which is approximately 16.56%. Since the MIRR is greater than the cost of capital, the project should be accepted.