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MOdmeumenarTate orrecurm NT Au Atu The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR, However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project's IRR Consider the following situation: Cute Camel Woodcraft Company is analyzing a project that requires an initial investment of $3,225,000. The project's expected cash flows are: Cash Flow Year Year 1 $275,000 -175,000 Year 2 Year 3 450,000 500,000 Year 4 Cute Camel Woodcraft Company's WACC is 8% , and the project has the same risk as the fim's average project Calculate this project's modifed intenal rate of return (MIRR) O 13.13 % O 18.54% O 17.77% O-20.73% If Cute Camel Woodoraft Company's managers select projects based on the MIRR rtenion, they should S this independent project which of the following statements about the relationship between the IRR and the MRR is comect O Atypical firm's RR wi be equal to its MIRR O Atypical firm's tR will be greater than its MIRR Atypical fm's TR8 wil be less than ts MIR Year Cash Flow Year 1 $275,000 Year 2 -175,000 Year 3 450,000 Year 4 500,000 Cute Camel Woodcraft Company's WACC is 8%, and the project has the same risk as the firm's average project Calculate this project's modified internal rate of return (MIRR) 13.13 % 18.54 % O 17.77 % O-20.73 % If Cute Camel Woodcraft Company's managers select projects based on the MIRR criterion, they should this independent project Which of the following statements about the relationship between the IRR and the MIRR is correct? O A typical firm's IRR will be equal to its MIRR O A bypical firm's 1RR will be greater than its MIRR O A typical firm's IRR will be less than its MIRR See& Coi Grade t Now Conteue withoat saing Security Notce Acsb ary Norice Ter of s

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