Look again at the project cash flows in Problem 10. Calculate the modified IRR as defined in
Question:
Look again at the project cash flows in Problem 10. Calculate the modified IRR as defined in Footnote 4 in Section 5.3. Assume the cost of capital is 12%.
Now try the following variation on the MIRR concept. Figure out the fraction x such that x times C1 and C2 has the same present value as (minus) C3.
Define the modified project IRR as the solution of
Now you have two MIRRs. Which is more meaningful? If you can't decide, what do you conclude about the usefulness of MIRRs?
Data from 10.
Calculate the IRR (or IRRs) for the following project:
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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a b 112 2 xC 1 112xC 2 C 3 x112 2 C 1 112C 2 C 3 Now find MIRR using either trial and er...View the full answer
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Related Book For 
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
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