1 COMPUTATION OF MIRR

0 1
Now
($10,000) 5,300
Negative sign indicates cash outflows
Positive sign indicates cash inflows

WACC = r = 10% = 0.1

Year Cash flows FVIF@10%

1 5,300 1.33100
2 4,300 1.21000
3 1,874 1.10000
4 1,500 1.00000

By definition:
Project cost = discounted at MIRR value of Futures positive CFs
10,000 = 15,819 / (1+MIRR)^4

(1+MIRR)^4 = 15,819/10000 = 1.5819

1+MIRR = (1.5819)^ (1/4)
1+MIRR = 1.12148
MIRR = 0.12148 or 12.15%

MIRR by using Excel function

Year Cash flows
0 (10,000)
1 5,300
2 4,300
 3 1,874
4 1,500
MIRR = 12.15% 12.15%

2 Profitability index (PI) = PV of positve CFs / Project cost

In sone books you will find it as BCR (benefit - cost ratio)
In some books you find formula for PI = NPV / Project cost

0 1
Now
($10,000) 5,300
Negative sign indicates cash outflows
Positive sign indicates cash inflows

WACC = r = 10% = 0.1

Year Cash flows PVIF@10%

1 5,300 0.90909
2 4,300 0.82645
3 1,874 0.75131
4 1,500 0.68301

PI = PV of positive Cfs / project cost

PI = 10804 / 10000 = 1.08

2 Payback period

Year Cash flows Cummulative CF

0 (10,000) (10,000)
1 5,300 (4,700)
 2 4,300 (400)
3 1,874 1,474
4 1,500

Payback period = 2 + (400/1874) = 2+0.21 = 2.21 years

OR 2 years , 2 months, 16 days

2 -400
x 0
3 1474

(x-2)/(3-2) = (0+400) /(1474+400) = 400/1874 = 0.21

x = 2+0.21 = 2.21

3 Discounted payback period

Year Cash flows PVIF@10%

0 (10,000) 1.00000
1 5,300 0.90909
2 4,300 0.82645
3 1,874 0.75131
4 1,500 0.68301

Discounted payback period = 3 + (220.14/1024.52) = 3 + 0.215 =

OR, 3 years , 2 months and 18 days

(12 months in year, 30 days in a month, 365 days in a year)

 cash flow timeline

2 3 4

4,300 1,874 1,500

FV of CFs
-
7,054.30 <=== this CF will be reinvested for 3 year
5,203.00 <=== this CF will be reinvested for 2 year
2,061.40 <=== this CF will be reinvested for 1 year
1,500.00 <=== Last year or terminal year, for terminal year n=0
15,819

IRR value of Futures positive CFs

ost ratio)
roject cost

cash flow timeline

2 3 4

4,300 1,874 1,500

FV of CFs

4,818.18
3,553.72
1,407.96
1,024.52
10,804
4) = 2+0.21 = 2.21 years 2.52
15.6

0/1874 = 0.21

DCF Cummulative DCFs

(10,000.00) (10,000.00)
4,818.18 (5,181.82)
3,553.72 (1,628.10)
1,407.96 (220.14)
1,024.52 804.38

3 + (220.14/1024.52) = 3 + 0.215 = 3.215 yers 0.21487135439

=0.215*12 2.58
=0.58*30 17.4
a month, 365 days in a year)