Hindelang 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 projected MIRR can be less than the WACC (and even negative),in which case it will be rejected.
A) 19.67%
B) 17.23%
C) 16.26%
D) 15.77%
E) 16.91%

Question

Hindelang 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 projected MIRR can be less than the WACC (and even negative),in which case it will be rejected. 
A) 19.67% 
B) 17.23% 
C) 16.26% 
D) 15.77% 
E) 16.91%

Quizplus · Accepted Answer

First, we need to calculate the project's NPV at the given WACC. Using the calculator, we find that the NPV is -$527.97. Next, we need to find the discount rate that gives us an NPV of 0 (i.e. the project's IRR). Using the calculator or trial and error, we find that the IRR is approximately 13.45%. Finally, we calculate the MIRR using the reinvestment rate that equates the future value of positive cash flows to the future value of negative cash flows. Using the calculator again, we find that the MIRR is 16.26%. Therefore, the best choice is C, as it is the only answer that matches the calculated MIRR.