2. Internal rate of return (IRR) The intemal rate of rotum (IRR) refers to the compound annual rate of retum that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Uama Mining Company: Blue Lama Mining Compony is evaluating a proposed capatal budgeting project (project Sigma) that will require an initiat investmert of 5650,000 Blue Uama Mining Company has been basing capltal budgeting decisions on a project's NPV howevec, its new Cro wants to start using the IRR method for capltal budgeting dedsions. The CFO says that the tare is a better method because retums in perantage form are easier to underatand and compare to required returns. Blue Lama Mining Company WACC is B\%, and project Sigma has the same rikk as the frin's average project. The project is expected to generate the fosowing net cash flow: Which of the following is the correct calculation of profect Sigma's IRR? 32.22% 28.19% 26.85% 29.54% If this is an independent project, the IRR method states that the firm should If the project's cost of capital were to increase, how would that affect the IRR? The IRR would not change. The 1RR would decrease. The IRA would increase