The IRR evalutaion 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 necessairly 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:

Celestial Crane Cosmetics is analyzing a project that requires an initial investment of $2,500,000. The project's expected cash flows are:

Year	Cash Flow
1	$300,000
2	-125,000
3	500,000
4	400,000

Celestial Crane Cosmetic's WACC is 10%, and the project has the same risk as the firm's average project. Calculatethis project's modified internal rate of return (MIRR). A.) 28.70% B.) 26.21% C.) 22.46% D.) -15.15% If Celestial Cosmetic's managers select projects based on the MIRR criterion, they should _________ (accept/reject) this independent project. Which of the following statements about the relationship between the IRR and the MIRR is correct? A.) A typical firm's IRR will be greater than its MIRR. B.) A typical firm's IRR will be less than its MIRR. C.) A typical firm's IRR will be equal to its MIRR.