- This topic has 1 reply, 2 voices, and was last updated 4 years ago by
.
Viewing 2 posts - 1 through 2 (of 2 total)
- Posts
MIRR calcuation
Please can you explain why the rate of 4.5 is used for discounting the cash flows and not the cost of capital of 12.5%?
4.5 is not used as the discount rate, it is used to work out the terminal values of cash receipts so as to estimate the terminal values of these flows. Using the cc of 12.5% here would be valid only if there were projects earning the cc. In the absence of any, the cash would have to be put on deposit at 4.5%.
Overall METIS is a very odd and rather old question and don’t spend long trying to understand it.
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.