I have tried to calculate IMRR using the following formula without success:
MIRR = [PVR/PVI]1/n(1+re)-1
PVR = the present value of the "Return Phase" of the project
PVI = The present value of the Ïnvestment Phase" of the project
re = the firm's cost of capital
However, supposing our PVR = 22,340 and PVI = 20,000 and the investment period is 1/4 what is the MIRR in this situation. The answer should be 11% but manipulating my calculator has failed to provide me with the accurate answer.
I will be grateful if someone can be of assistance to me in explaining to me on how to manipulate my calculator to arrive at the appropriate answer. my email address is email@example.com
Many thanks in anticipation for your assistance.
Mohammed T. Elomi
Dear Mohammed T Elomi,
you haven't given the "re", therefore, may be you are getting wrong answer. Plz see below example for your calculation.
PVr = 5290
PVi = 3800
re = 13%
n = 4yrs
Take 4th under root of 5290/3800. Follow below steps to use calculator:
a) 5290/3800 will give you 1.392
b) then press 4 + shift + power + 1.392(from above). This will give you 1.0862
c) multiply 1.0862 with 1.13 (i.e. 1+13%) will give you 1.2274
d) subtract 1 from above will give you 1.22 - 1 = 0.22 or 22.74%
follow above steps for your all MIRR calculations and you will get the result.
Above quoted example is from June 2012 paper, Q4(Tisa)