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 IRRThus, the modified IRR approach makes a more reasonable assumption other than the project's IRR Consider the following situation

Grey Fox Aviation Company is analyzing a project that requires an initial investment of $400,000. The project's expected cash flows are: Grey Fox Aviation Company's WACC is 9%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): 26.5700 19.64% 18.48% 23.10% If Grey Fox Aviation Company's managers select projects based on the MIRR criterion, they should Which of the following statements best describes the difference between the IRR method and thei this independent project. The IRR method uses only cash infiows to calculate the IRR. The MIRR method uses both MIRR. The IRR method uses the present value of the initial investment to calculate the IRR. The MrRR method uses the terminal value of the initial investment to calculate the MIRR, The tRR method assumes thot cash flows are reinvested at a rate of retum equal to the IRR. The MIRR method astumes that cath fowr are reinvested at a rate of return equal to the cost of capital