MindTap - Cengage Learning - Internet Explorer 1651172345197051 MindTap Assignme
ID: 2724675 • Letter: M
Question
MindTap - Cengage Learning - Internet Explorer 1651172345197051 MindTap Assignment 11-The Basics of Capital Budgeting Green Caterpillar Garden Supplies Inc. is analyzing a project that requires an initial investment of $4 project's expected cash flows are: Year Cash Flow Year 1 $275,000 Year 2 -150,000 Year 3 475,000 Year 4 425,000 Green Caterpillar Garden Supplies Inc.'s WACC is 8%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): 19.85% 22.06% 18.75% 26.47% If Green Caterpillar Garden Supplies Inc.'s managers select projects based on the MIRR criterion, Inc.'s managers select projects based on the MIRR criterion, they should this independent project. Which of the following statements best describes the difference between the IRR method and the O The IRR method assumes that cash flows are reinvested at a rate of return equal to the MIRR method? IRR. The MIRR method assumes that cash flows are reinvested at a rate of return equal to the cost of capital. the terminal value of the initial investment to calculate the MIRR. cash outflows to calculate the MIRR. O The IRR method uses the present value of the initial investment to calculate the IRR. The MIRR method uses O The IRR method uses only cash inflows to calculate the IRR. The MIRR method uses both cash inflows and MndTap inis-2016-3P- MindTap-Cengage L..Explanation / Answer
Answer: MIRR=22.06%
Answer : Accept
Answer: the internal rate of return (IRR) assumes the cash flows from a project are reinvested at the IRR, the modified IRR assumes that positive cash flows are reinvested at the firm's cost of capital.
WACC 8% Year Cash Flows ($) 0 -450000 1 275000 2 -150000 3 475000 4 425000 MIRR 22.06%