for MIRR calculation:
Investment phase= investment only (e.g; 600 invested for machinery) or investment less capital allowance
Time of project: 1/n……is n equal to the duration of the project told (e.g; cash flows over 4 years) or do we use the entire duration (e.g; where because tax is paid 1 years in arrears-5 years)
Finally, Issue cost pf finance (debt and equity)-do we include this in our cash flow forecast to find present value of return and investment phase?
Note: The reason i asked is because several question in the BPP kit used but methods described about-so for december 2012, which one would our examiner perfer? thanks
1) investment only, coz capital allowance is operating cash flow (after contribution)
2) n= 4 years (project life)
3) issue cost is financing side effect, separate beta, therefore not included
I saw from OpenTuition notes, n= project life, but I did a question ‘Neptune’, n= project life + 1
n is the number of years of the project (as per the examiner).
In Neptune the cash flows resulting from the project occur for six years.
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