2. Internal rate of return (IRR)

The internal rate of rerum (IRA) sefers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows, Consider the case of Blue Lama Mining Company: Biue Llama Mining Company is evsluating a proposend capital budgeting project (project Sigma) that will require an initial ifivestment of 5800,000 Biue Liama Minang Company has been baking capital budgeting decisions on a project's Npy; however, its new CFO wants to start using the IKER method for capital budgeting decisionsi The CFO says that the IRR is a better method because returns in percentage form are easier to understond and compsre to required returns. Blue Lama Mining Company's WAcC is 7 Wi, and project Sigrna has the same risk as the firm's average progect. The project is expected to generate the following net cash flows: Whach of the following is the forrect calculation of project 5 igrnais like? Which of the following is the corred calculation of project Sigma's IRR? 42.67% 48.77% 40.64% 36.58% If this is an independent project, the IRR method states that the firm should If the project's cost of copital kere to increase, how would that affect the IRe The lkr would not change. The trip would inciease the thet would decrease