Respuesta :
Answer and Explanation:
The computation of the MIRR is shown below:
But before that terminal cash flow required to calculate
Year Cash Flows FV Factor Formula Terminal Value
(Cash Flow × FV Factor)
0 ($1,000)
1 $450 1.21 (1 +10%)^(2) $545
2 $450 1.1 (1 + 10%)^(1) $495
3 $450 1 1 $450
Terminal Cash Flow $1,490
now the MIRR is
[tex]MIRR = \sqrt[n]{\frac{terminal\ cash\ flow}{initial\ investment} } - 1\\\\= \sqrt[3]{\frac{\$1,490}{\$1,000} } - 1[/tex]
= 14.22%
As it can be seen that the MIRR is more than the WACC so the project should be accepted.
