9. Modified internal rate of return (MIRR) Aa Aa The IRR evaluation method assumes that cash flows from the project are reinvested at a rate equal to the projects IRR. However, in reality, the reinvested cash flows may nat necessarily generate a retum equal to the IRR. Thus, using the modified IRR approach, you can make a more reasonable estimate ofa project's rate of retum than the projedt's IRR can. Consider the following situation: Celestial Crane Cosmetics is analyzinga project that requires an initial investment of $600,00D. The project's expected cash flows are: Year Cash Year 1 $275,000 Year 2 -100,0D Year 3 500,000 Year 4 450, 00D Celestial Crane Cosmetics's WACC is 9%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of retum (MIRR): O 18.55% 17.62% O 19.48% 14.84% If Celestial Crane Cosmetics's managers select projects based on the MIRR criterion, they should independent project. this reject accept which of the following statements best describes the difference between the IRR method and the MIRR method? O 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 ivestment to calculate the MIRR. O The IRR method uses only cash nflows to calculate the IRR. The MIRR method uses both cash inflows and cash outilows to calculate the MIRR. The IRR method assumes that cash flows are reinvested at a rate of retum equal to the IRRThe MIRR method assumes that cash flows are reinvested ata rate of retum equal to the cost of capital