Los Angeles Lumber Company (LALC) is considering a project with a cost of $1,000 at Year 0 and inflows of $300 at the end of Years 1-5. LALC's cost of capital is 10 percent. What is the project's modified IRR (MIRR)?

MIRR= 12.9%

Explanation:

You can do this on excel using the '=MIRR' function. Enter  the following cashflows on excel;

Initial investment; CF0 = -1,000

Year 1 cashflow; C01 = 300

Year 2 cashflow; C02 = 300

Year 3 cashflow; C03 = 300

Year 4 cashflow; C04 = 300

Year 5 cashflow; C05 = 300

Rate = 10%

then type in "= MIRR ", and the function will pop up, select it and highlight all the cells with the above cashflows, use 10% as finance rate & reinvestment rate and press "ENTER". The MIRR would be; 12.9%

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