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Hi sir
When calculating the MIRR using the formula on the formula sheet
I get the PV of return phase to be 3,666 (discounting at 29% IRR)
PV of investment phase is 3,800
Plugging these figures in & using WACC 12.75 as ReI get ((3,666/3,800)^.25(1.1275)-1) = 11%, which is very far off BPP solution of 22.7%
If however I use IRR of 29% as Re, I get 28%, which is much closer
Am I supposed to use WACC or IRR as Re in the formula??
And if is WACC then please tell me why I am so far off the correct solution?Thanks
You should use the WACC of 12.75% in the formula.
But you should also use the WACC of 12.75% when getting the PV of the return phase (you have used 29%).
If you discount the return phase at 12.75% then you get a PV of of 5325. Putting that in the formula will give you the correct answer.
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