Internal rate of return

The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Consider the following case: Free Spirit Industries is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1, 450,000. Free Spirit Industries has been basing capital budgeting decisions on a project's 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. Free Spirit Industries's WACC is 10%, and project Delta has the same risk as the firm's average project. The project is expected to generate the following net cash flows: Which of the following is the correct calculation of project Delta's IRR? 6.13% 5.21% 7.05% 5.82% 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 decrease The IRR would not change