3. Understanding the IRR and NPV Aa Aa E The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Cute Camel Woodcraft Company: Last Tuesday, Cute Camel Woodcraft Company lost a portion of its planning and financial data when both its main and its backup servers crashed. The company's CFO remembers that the internal rate of return (IRR) of Project Lambda is 13.8%, but he can't recall how much Cute Camel originally invested in the project nor the project's net present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Lambda. They are: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $2,200,000 $4,125,000 $4,125,000 $4,125,000