Precision Financial Calculator Precision Financial CalculatorIf you reinvest the incomes from a project at the rate of IRR of that project, what will be the results? If you reinvest the incomes from a project at the rate of a discount rate you assigned at the beginning, what will be the results?
[Solution]
Create yearly cash flows: -1000,300,300,300,300 and select 3% as the discount rate. This gives you IRR=7.71%, NPV=$115. Now, go to Reinvestment tab, type in 7.71 in the Reinvestment Interest Rate box. The MIRR will be the same as 7.71% - the net IRR will be the same if you reinvest at the same IRR rate.
Next, type in 3 in the Reinvestment Interest Rate box. The Modified NPV @ 3% will remain the same as $115 - the net NPV will be the same if you reinvest at the same discount rate.