Mass Company is investing in a giant crane. It is expected to cost $6 million in initial investment, and it is expected to generate an endofyear cash flow of
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Question
Mass Company is investing in a giant crane. It is expected to cost $6 million in initial investment, and it is expected to generate an endofyear cash flow of $3 million each year for three years. At the end of the fourth year, there will be a $1 million disposal cost. Calculate the MIRR for the project if the cost of capital is 12 percent.
1 Answer

1. User Answers ogorwyne
Answer:
17.8%
Explanation:
the formular for MIRR
= [tex]\frac{FVcashinflow}{PVcashoutflow } ^{1/n} 1[/tex]
we solve for the future value =
3(1+0.12)³ + 3(1+0.12)² + 3(1+0.12) =
4.2147 + 3.7632 + 3.36
= 11.3379
we also calculate present value
= [tex]6[\frac{1}{1+0.12}] ^{4}[/tex]
= 60.6355
= 5.3645 million
MIRR = [tex][\frac{11.3379}{5.3645}] ^{1/4}[/tex]1
= 0.178
= 17.8%