Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,500,000.

Blue Llama Mining Company has been basing capital budgeting decisions on a projects NPV; however, its new CFO wants to start using the 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. Blue Llama Mining Companys WACC is 8%, and project Delta has the same risk as the firms average project.

The project is expected to generate the following net cash flows:

Year	Cash Flow
Year 1	$350,000
Year 2	$475,000
Year 3	$400,000
Year 4	$475,000

Which of the following is the correct calculation of project Deltas IRR?

4.26%

5.01%

4.76%

5.26%

If this is an independent project, the IRR method states that the firm should .