Consider the case of Fuzzy Button Clothing Company Last Tuesday, Fuzzy Button Clothing Company 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 retum (IRR) of Project Gamma is 11.3%, but he can't recall how much Fuzzy Button originally invested in the project nor the project's net present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Gamma. They are: Year Year 1 Cash Flow $2,000,000 $3,750,000 Year 2 Year 3 $3,750,000 $3,750,000 Year 4 The CFO has asked you to compute Project Gamma's initial investment using the information currently available to you. He has offered the following suggestions and observations: A project's IRR represents the return the project would generate when its NPV is zero or the discounted value of its cash inflows equals the discounted value of its cash outflows-when the cash flows are discounted using the project's IRR. The level of risk exhibited by Project Gamma is the same as that exhibited by the company's average project, which means that Project Gamma's net cash flows can be discounted using Fuzzy Button's 7% WACC - 12: Assignment - Capital Budgeting: Decision Criteria Year Cash Flow Year 1 $2,000,000 Year 2 $3,750,000 Year 3 $3,750,000 Year 4 $3,750,000 The CFO has asked you to compute Project Gamma's initial investment using the information currently available to you. He has offered the following suggestions and observations: A project's IRR represents the return the project would generate when its NPV is zero or the discounted value of its cash inflows equals the discounted value of its cash outllows-when $11,560,041 discounted using the project's IRR. The level of risk exhibited by Project Gamma is the same $9,987,714 Jd by the company's average project, which means that Project Gamma's net cash flows can be discounted using % WACC $10,329,788 $10,081,684 Given the data and hints, Project Gamma's initial investment is dollar). and its NPV is (rounded to the nearest whole A project's IRR will if the project's cash inflows increase, and everything else is unaffected. The CFO has asked you to compute Project Gamma's initial investment using the information currently available to you. He has offered the suggestions and observations: A project's IRR represents the return the project would generate when its NPV is zero or the discounted value of its cash inflows equals the discounted value of its cash outflows-when the cash flows are discounted using $863,051 The level of risk exhibited by Project Gamma is the same as that exhibited by the company's Ft, which means that $1,240,636 Project Gamma's net cash flows can be discounted using Fuzzy Button's 7% WACC. $1,132,755 $1,078,814 and its NPV is (rounded to the neares Given the data and hints, Project Gamma's initial investment is dollar), A project's IRR will if the project's cash inflows increase, and everything else is unaffected. Year Cash Flow Year 1 $2,000,000 Year 2 $3,750,000 Year 3 $3,750,000 Year 4 $3,750,000 The CFO has asked you to compute Project Gamma's initial investment using the information currently available to you. He has offered the following suggestions and observations: A project's IRR represents the return the project would generate when its NPV is zero or the discounted value of its cash inflows equals the discounted value of its cash outflows when the cash flows are discounted using the project's IRR. The level of risk exhibited by Project Gomma is the same as that exhibited by the company's average project, which means that Project Gamma's net cash flows can be discounted using Fuzzy Button's 7% WACC. (rounded to the nearest whole decrease Given the data and stay the same ma's initial investment is and its NPV is dollar) increase A project's IRR will if the project's cash inflows increase, and everything else is unaffected Grade It Now Save & Continue