Show transcribed image text 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 projectA?’s IRR. Consider the following situation: Cute Camel Woodcraft Company is analyzing a project that requires an initial investment of S2,225,000. The projectA?’s expected cash flows are: Cute Camel Woodcraft CompanyA?’s WACC is 8%, and the project has the same risk as the firmA?’s average project. Calculate this projectA?’s modified internal rate of return (MIRR). If Cute Camel Woodcraft CompanyA?’s managers select projects based on the MIRR criterion, they should this independent project. Which of the following statements about the relationship between the IRR and the MIRR is correct? A typical firmA?’s IRR will be greater than its MIRR. A typical firmA?’s IRR will be equal to its MIRR. A typical firmA?’s IRR will be less than its MIRR.