Page 38 - AFM Integrated Workbook STUDENT S18-J19
P. 38

Chapter 2




                              3.5   The MIRR method and decision rule

                                  MIRR can be calculated using the formula:



                                              1
                                        PV R  n
                              MIRR =            1+ r   –1
                                                    e
                                         PV I

                              Where   PV R = the present value of the 'return phase' of the project

                                        PV I = the present value of the 'investment phase' of the
                                        project

                                        n = the project’s life in years

                                        r e = the firm's cost of capital.


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













































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