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Modified Internal Rate of Return(MIRR) - Capital Budgeting Techniques (in Hindi)
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Heena Malhotra
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Ma'am jb koi members disqualified hai member banne ke liye to bo vote kaise kr sktaa hai parliament me fr kaise bo baith sktaa ye baat mere ko smjh nhi aayi plse ma'am reply me
intermediate cash inflow ????
  1. Capital Budgeting Decisions By Heena Malhotra


  2. Limitations of IRR O The calculation process is tedious O The IRR approach creates a peculiar situation if we compare two projects with different inflow/outflow patterns. O It is assumed that under this method Intermediate cash inflows of a proposal are reinvested at a rate equal to the IRR. It is ridiculous to imagine that the same firm has a ability to reinvest the cash flows at a rate equal to IRR. By Heena Malhotra


  3. MIRR O In MIRR technique, all the intermediate cash inflow are considered to be reinvested at cost of capital till the end of the project and a single terminal inflow is computed and there after MIRR is determined. By Heena Malhotra


  4. Internal Rate of Return Method (IRR) IRR Definition: Internal rate of return for an investment proposal is the discount rate that equates the present value of the expected net cash flows with the initial cas outflow By Heena Malhotra


  5. An investment of 1,36,000 yields the following cash inflows (profits before depreciation but after tax). Determine MIRR considering 8% as cost of capital. Year 30,000 40,000 60,000 30,000 20,000 1,80,000 2 SOLUTION Year- 0, Cash flow-1,36,000 The MIRR is calculated on the basis of investing the inflows at the cost of capital. The table below shows the valued of the inflows if they are immediately reinvested at 8%. By Heena Malhotra


  6. Future value interest factor of 1 per period at i% for n periods, FVIF(i,n). (The Compound Sum of One Rupee) 1% 596 696 796 8% 1.100 2 1.020 1.040 1061 1.082 1.103 1.124 .145 1.166 1.188 1.210 3 1.030 1.061 1.093 1.125 1.158 1.191 1.225 1.260 1295 1.331 1.464 11.010 1.020 1.030 .040 1.050 .060 1.070 1.080 1.090 4 1.041 1.082 1.126 1.170 1.216 1.262 1.311 1.360 1.412 1.539 6 1.062 1.126 1.194 1.265 1.340 1419 .501 1.587 .677 7 1.072 1.149 1.230 1316 1.407 .504 1.606 1.714 1.828 1051 1104 1159 1217 1.2761 1.338 1403 1469 1.772 1.949 8 1.083 1.172 1.267 1369 1.477 1.594 1.718 1.851 993 2.144 2.358 2.594 11 1.116 1.243 1.384 1.539 .710 1.898 2105 2.332 2.5802.853 12 1.127 1.268 1.426 1.601 1.796 2.012 2.252 2.518 2.813 3.138 3.452 3.797 9 1.094 1.195 1.305 1423 1.551 1.689 1.838 1.999 2.172 2.367 101105 1.219 1.344 1480 1791 1967 2.159 13 1.138 1.294 1.469 1.665 1.886 2.133 2.410 2.720 3.066 14 1.149 1.319 1.513 1.732 1.980 2.26 2.579 2.937 3.342 151161 1346 1558 1801 2.079 2.397 2.759 3.642


  7. YearCash flow 30,000 40,000 60,000 30,000 20,000 @ 8% reinvestment rate factor 1.3605 1.2597 1.1664 1.0800 1.0000 40,815 50,388 69,984 32,400 20,000 2,13,587 2 4 By Heena Malhotra


  8. The total cash outfow in year 0 R 1,36,000) is compared with the possible inflow at year Sandth esulting iure of 600037 sthedicoun factorinyears,By 1,36,000 2,13,587 looking at the year 5 row in the present value tables,you will see that this gives a return of 9%. This means that the 72,13,587 received in year 5 is equivalent to 1,36,000 in year 0 if the discount rate is 9% By Heena Malhotra


  9. Present value interest factor of 1 per period at i% for n periods, PVIF(i,n). 0.980 0.97 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.942 0.915 0.889 0.924 0.888 0.855 0.9060.8630.822 0.784 07470.7130.681 0.650 0.621 0.888 0.837 0.790 0.7 0.990 2 0.980 3 0.971 4 0.961 5 0.951 6 0.942 7 0.933 0.871 0.813 0.760 0.711 0.665 .623 0.583 0.547 0.513 8 0.923 9 0.864 0.823 0.840 0.816 0.794 0.772 0.751 0.792 0.763 0.735 0.708 0.683 46 0.705 0.666 0.630 0.596 0.564 0.853 0.789 0.731770.627 0.582 0540 0.502 0.467 0.837 0.766 0.703 0.914 0.592 0.5440.500 0.460 0.424 0.558 0.508 0.463 0422 820 0.744 0.676 0.614 0.804 0.722 0.650 0.5 0.788 0.701 0.625 0.5570.497 0.4440.397 0.356 0.319 0.773 0.681 0.601 0.758 0.661 0.577 0.50 0.743 0642 0.555 0481 0417 0.362 0.315 0.275 0.239 0.728 0.623 0.534 0.714 0.605 0.513 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.896 120.887 13 0.879 14 0.870 85 0.527 0.475 0.429 0.388 0.350 0.530 0.469 0.415 0.368 0.326 0.290 0.442 0.388 0.340 0.299 0.263 16 0.853 17 0.844 18 0.836 0.458 0.436 0.394 0.339 0.292 0.252 0.218 0.371 0.317 0.270 0.231 0.198


  10. MIRR O In MIRR technique, all the intermediate cash inflow are considered to be reinvested at cost of capital till the end of the project and a single terminal inflow is computed and there after MIRR is determined. The decision criterion of MIRR is same as IRR .e. you accept an investment if MIRR is larger than required rate of return and reject if it is lower than the required rate of return By Heena Malhotra