Ch 11: Assignment - The Basics of Capital Budgeting Attempts Average/2 3. 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 Green Caterpillar Garden Supplies Inc. Last Tuesday, Green Caterpilar Garden Supplies inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company's CFO remembers that the internal rate of return (IRR) of project Zetais 14.656, but he can't recall how much Green Caterpillar originally invested in the project ner the project's not present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Zata. They are: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $2,000,000 53.750.000 $3,250.000 $3.750.000 The Cro has asked you to compute Project atas initial investment using the information currently valable to you. He has offered the following suggestions and observations A project's Represents the return the project would be when i NPV or the counted value of its cathos quab the discounted value of its cash out when the cash flow and counted in the project's TRR The level of risk ohibited by Project Zetas the same as that exhibited by the company's average project which means that Project Zeta's net cash flows can be discounted using Green Caterpillar's 'WACC Genthe data and Project Zetas initial investment is dolar) and its NP (rounded to the nearest whole A pract's A Will the project's cashiedere and everything else waffected Grade It Now Save & Continue