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 However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRA 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 $3,000,000. The project's expected cash flows are: Year Year 1 Year 2 Year 3 Cash Flow $375,000 -125,000 400,000 450,000 Year 4 Cute Camel Woodcraft Company'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 (MIRA): Ch 11: Assignment. The Basics of Capital Budgeting Year 2 -125,000 Year 3 400,000 Year 4 450.000 Cute Camel Woodcraft Company'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): -18.20% O 19.72% @ 16.619 17.65% this independent project. If Cute Camel Woodcraft Company's managers select projects based on the MIRR criterion, they should Which of the following statements about the relationship between the IRR and the MIRR is correct? A typical firm's TRR will be less than its MIRR. A typical firm's TRR will be greater than its MIRR. A typical firm's IRR will be equal to its MIRR. Grade It Now Save & Continue Continue without saving