pter 11 Assight 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: Cold Goose Metal Works Inc. is analyzing a project that requires an initial investment of $500,000. The project's expected cash flows are: Year Year 1 Year 2 Cash Flow $275,000 -125,000 475,000 425,000 Year 3 Year 4 Cold Goose Metal Works Inc.'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): 18.54% 23.69% 0 24.72% 20.60% this independent project. 11 Cold Goose Metal Works Inc.'s managers select projects based on the MIRR criterion, they should