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Blue Uama Mining Company is evalusting a proposed captal budgeting project (preject Desta) that anl reaulre an intiol invest-mert of $1,450,000. Blue Uema Mining Company
Blue Uama Mining Company is evalusting a proposed captal budgeting project (preject Desta) that anl reaulre an intiol invest-mert of $1,450,000. Blue Uema Mining Company hos been basing copital budgeting declisont on a project's NeV; howeve, its new Cro wants ta start using the IRR method for copital budgeting decilions. The Cro styt that the IRR is a better method because percentages and retums are easier to understand and to compare to required retums, flue Uams Mining Companr's wacc is 10\%, and project Deea has the same risk as the firm's averege project. The project is expected to generate the following net cash fows: Which of the following is the correct calculstion of project Delta's tRa?? 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 increase. The IRR would not change. The IRR would decrease
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