5. Understanding the IRR and NPV 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 Wooduraft Company: Last Tuesday, Cute Camel Woodcaft Company lost a portion of its planning and financial data when both its main and its backup servers crashed. The company's CFo remimbers that the inteinal rate of return (IRR) of Project zeta is 14.6%, but he can't recall how much cute Came originally invested in the project nor the project's not present value (NPV). However, he found a note that detalled the annual net cash flows expected to be generated by Project zeta. They are: The CFO has asked you to compute Project Zeta's initial investment using the information currently avallable to you. He has offered the following suggestions and observations: - A project's IRR represents the return the project would penerate when its NPV is zero or the discounted value of its cash inflows equals the discounted value of its cash putflows-when the cash flows are discounted using the project's IRR. - The level of risk exhibited by Project Zeta is the-same-as that exhibited by the company's average project, which means that Project Zeta's net cash flows can be discounted using Cute Camel's 9% WACC. Given the data and hints, Project zetas initial investment is and its NpV is (rounded to the nearest whole dollar). A wrojects the will If the projects cash inflows decrease, and twervthing else is unaffected