4. Modified internal rate of return (MIRR) Aa Aa E 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: Leeding Engines Ltd. is analyzing a project that requires an initial investment of 550,000. The project's expected cash flows are: Year Cash Flow Year 1 $375,000 Year 2 -200,000 Year 3 500,000 Year 4 475,000 Leeding Engines Ltd.'s WACC is 7%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): O O O O 23.20% 19.33% 16.43% 21.26% this If Leeding Engines Ltd.'s managers select projects based on the MIRR criterion, they should independent project