4. Modified internal rate of return (MIRR) The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. Howeves, 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: Cold Goose Metal Works Inc. is analyzing a project that requires an initial investment of $450,000. The project's expected cash flows. are: Cold Goose Metal Works Inc's WACC is 10%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): 28.44% 22.26% 23.49% 24.73% If Cold Goose Metal Works Inci's managers select projects based on the MIRR criterion, they should this independent project. Which of the following statements best describes the difference between the IRR method and the MIRR method? The IRR method uses the present value of the initial investment to calculate the IRR. The MIRR method uses the terminal value of the initial investment to calculate the MIRR. The IRR method uses only cash inflows to calculate the IRR. The MIRR method uses both cash inflows and cash outflows to calculate the MIRR. The IRR method assumes that cash flows are reinvested at a rate of return equal to the IRR. The MIRR method assumes that cash flows are reinvested at a rate of return equal to the cost of capital. Suppose you are evaluating a project with the expected future cash inflows shown in the following table, Your boss has asked you to calculate the project's net present value (NPV). You don't know the project's initial cost, but you do know the project's regular, or conventional, paytack period is 2.50 years. If the project's weighted average cost of capital (WACC) is 7%, the project's NPV (rounded to the nearest dollar) is: $510,028 $425,023 $361,270 $488,776 If the project's weighted average cost of capital (WACC) is 7\%, the project's NPV (rounded to the nearest dollar) is: $510,028$425,023$361,270$488,776 Which of the following statements indicate a disadvantage of using the reoular payback period (not the discounted payback period) for capital budpeting decisions? Check all that apply. The payback period is calculated using net income instead of cash flows. The payback period does not take the time value of money into account. The payback period does not take the project's entire life into account