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CAPITAL INVESTMENT APPRAISAL
Modified Internal Rate of Return (MIRR)
Project B:
Calculate the future value of the cash inflows for each year using the WACC:
Year 1: 35 000 x 1.145 = 40 075
Year 2: 55 000 x 1.07 = 58 850
Year 3: 120 000 x 1 = 120 000
Total value of cash inflows at the end of year 3: 218 925
NPV = 28 643 (previously 28 660 – rounding difference)
MIRR = 13.43%
The MIRR and NPV methods now both favour Project B.
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