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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Tisa (6/12)
Hi sir
Bpp solution for part b, MIRR calc….
Is it ok to use the IRR of 28% as the discount factor to calc the PVs for the cash flows?
Eg PV yr 2 = 1,153/1.28^2 = 704
Thanks
BPP used the WACC as the discount factor
No – it is not OK to use the IRR.
The whole point of MIRR is to use the WACC – MIRR assumes reinvestment is at WACC whereas the conventional IRR assumes reinvestment is at the IRR.
(The free lecture on this may help you)