Purple whale foodstuff's inc. is evaluating a proposed capital budeting project (project Delta) that will require an inital invetment of $1,450,000.

Purple whale foodstuff's inc. has been basing capital budgeitng decisons on a project NPV; however, its new CFO wants to start using the IRR method for capital budeting decisions. The CFO says that the IRR is a better mothod because percentages and reeturns are easier to understand and to compare to required returns. Purple Whale foodstuff's inc.'s WACC is 8%, and project Delta has the same risk as the firm's average project.

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

Year	Cash flow
Year 1	$325,000
Year 2	$450,000
Year 3	$425,000
Year 4	$450,000

Which of the following is the correct calcuation of project Delta's IRR?

a. 4.63%

b. 6.17%

c. 5.65%

d. 5.14%

IF this is an independent project, the IRR method states that the firm should _____?

a. accept project delta

b. reject project delta

IF the project's cost of capital were to increase, how would that affect the IRR?

a. THe IRR would increase

b. The IRR would decrease

c. THe IRR would not change