5. Internal rate of return (IRR) Ziff Corp. Is evaluating a proposed capital budgeting project that will require an initial investment of $1,350,000. The project is expected to generate the following net cash flows: Year 1 Net Cash Flow $300,000 $425,000 $400,000 2 3 $425,000 Ziff Corp. has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the internal rate of retur (IRR) method for capital budgeting decisions. The CFO says that the IRR is a better method, because percentages and returns are easier to understand and to compare to required returns. Ziff Corp.'s desired rate of return is 5%. Which of the following is the IRR of the project? 113.81% 5.50% O 6.50% 5.00% O 3.80 If this is an independent project, the IRR method states that the firm should the project If the project's desired rate of return increased, how would that affect the IRA? 3 $400,000 $425,000 4 Ziff Corp. has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the internal rate of return (IRR) method for capital budgeting decisions. The CFO says that the IRR is a better method, because percentages and returns are easier to understand and to compare to required returns. Ziff Corp.'s desired rate of return is 5%. Which of the following is the IRR of the project? O 113.81% 0 5.50% 6.50% 0 5.00% 3.80% If this is an independent project, the IRR method states that the firm should the project accept If the project's desired rate of return increased, how would that affect the TR reject The IRR will not change The IRR will increase. The IRR will decrease