4. Internal rate of return (IRR) The internal rate of rerum (1refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case, Blue Llama Mining Company in evaluating a proposed capital budgeting project (project Delta) that will require an initiat Investment of $1.500.000 Blue Lama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new Cho wants to start using the IRR method for capital budgeting decisions. The ro ways that the IRR is a better method because percentages and retums are easier to understand and to compare to required seturns. Blue Llama Mining Company's WAE%, and project Delta has the same risk as the firm's average project, The project is expected to generme the following net cash flowe Year Cash Flow Year 1 Year 2 $300.000 $425.000 $475,000 Year 3 Year 4 $450.000 Which of the following is the correct calculation of project Delta's IRR2 3.87% 4.06% 3.699 4.249 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 decrease The TRR would not change. The IRR would increase NA