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Chapter 2

3.5 The MIRR method and decision rule

 MIRR can be calculated using the formula:

PV R 1
MIRR = 1+ r –1
e
PV I n

Where PVR = the present value of the 'return phase' of the project

PVI = the present value of the 'investment phase' of the
project

n = the project’s life in years

re = the firm's cost of capital.

 an MIRR higher than the cost of capital means that the project is
financially acceptable.

Illustrations and further practice

Now try TYU 3 and TYU 4 from Chapter 2

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