The internal rate of retum (IRR) refers to the compound annual rate of retum that a project generates based on its up-front cost and subsequent cash flows, Constder the case of Blue Lama Mining Compary: Blue Ulama Mining Company is evaluating o proposed capital budgeting project (project Sigma) that will require an initjal investrnent of $750,000. Blue Lama Mining Company 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 returns in percentage form are easier to understand and compare to required retums. Blue Llama Mining Company's WACC is 10%, and project Sigma has the same risk as the firm's average project. The project is expected to generate the following net cash fows: Which of the following is the correct calculation of project Sigma's IRR? 40.33%38.41%34.57%36.49% 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 iftr woutd decrease. The IRR would not change