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: Fuzzy Badger Transport Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,500,000. Fuzzy Badger Transport 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 percentages and returns are easier to understand and to compare to required returns. Fuzzy Badger Transport Company'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? Year Cash Flo Year 1 $275,000 Year 2 $400,000 Year 3 $500,000 Year 4$400,000 1.86% 0 2.23% o 1.58% 0 1.95% 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? O The IRR would not change The IRR would decrease O The IRR would increase