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: Celestial Crane Cosmetics is analyzing a project that requires an initial investment of $400,000. The project's expected cash flows are: Year Year 1 Cash Flow $325,000 - 150,000 500,000 Year 2 Year 3 Year- 400,000 Celestial Crane Cosmetics's WACC is 3%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): 27.72 Celestial Crane Cosmetics'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): X O 27.72 30.36% 26.40% 25.0896 If Celestial Crane Cosmetics's managers select projects based on the MIRR criterion, they should this independent project. Which of the following statements best describes the difference between the IRR method and the IRR method The 18 method uses only cash inflows to calculate the tre. The MERR method uses both cash itlows and cash outflows to calculate the MIRR The IRR method uses the present value of the initial investment to calculate the tr. The MERR method uses the terminal value of the Initial investment to calculate the MIRR The IRR method assumes that cash flows are invested at a rate of return equal to the IRR. The MIRR thodumes that cash flow are reinvested at a rate of return out to the cost of capital