ACCT-311 Lecture Notes - Lecture 4: Net Present Value, Investment
25 Mar 2016
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Modiied internal rate of return (mirr: mirr is the discount rate that causes the pv of a project"s terminal value (tv) to equal the pv of costs. Tv is found by compounding inlows at wacc: mirr assumes cash inlows are reinvested at wacc, which is reasonable, mirr is unique. First, find pv and tv (r = 10%) Second, find discount rate that equates pv and tv. First, enter cash inlows in the inancial calculator register: Cf0 = 0, cf1 = 10, cf2 = 60, cf3 = 80. Enter pv = -118. 78, n = 3, i = 10, Press fv = 158. 10 = fv of inlows. For this problem, there is only one ouflow, cf0 = -100, so the. For other problems, there may be negaive cash lows for several years, and you must ind the present value for all negaive cash lows. Step 4: find irr of tv of inlows and pv of ouflows.
