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 the case of Blue Lama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $900,000 Blue Liama 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 formare 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 flows: Year Year 1 Year 2 Cash Flow $300,000 5425,000 $475,000 $450,000 Year 3 Year 4 Which of the following is the correct calculation of project Sigma's IRR? O 30.00% O 31.36% O 21.82% 0 27.27% 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. O The IRR would increase. O The IRR would decrease