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. Conslder the case of Blue Uama Mining Company: Bue Lama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will recuire an initial investment of $900,000. The company has been basing capital budgeting decisions on o project's NPV; however, its new Cro wants to ntart using the tRR method for capital budgeting decisions. The CFO says that the IRR is a better method becaute returns in percentage form are easier to understand and compare to required returns, Blue Lama Mining Company's WACC is 9%, and project Sigma has the same risk as the firm's average project. The project is expected to generate the following net cash nows: Which of the following is the correct calculation of project Sigma's IRR? 27.27% 24.54% 25.91% 21.82% If this is an independent project, the IRR method states that the firm should project Sigma. If mutually exclusive projects are proposed that both have an IRR greater th accept: essary WACC, the IRR method states that the firm should the project with the greater future cash inflows, assuming that both projects have the same risk as the firm's average project. the project that requires the lowest initial investment, assuming that both projects have the same risk as the firm's average project. the project with the greatest IRR, assuming that both projects have the same risk as the firm's average project