The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Cold Goose Metal Works Inc.: Last Tuesday, Cold Goose Metal Works Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company's CFO remembers that the internal rate of return (IRR) of Project Lambda is 14.5%, but he can't recall how much Cold Goose originally invested in the project nor the project's net present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Lambda. They are: Year Year 1 Cash Flow $2,200,000 $4,125,000 54,125,000 Year 2 Year 3 Year 4 $4,125,000 The CFO has asked you to compute Project Lambda's initial investment using the information currently available to you. He has offered the following suggestions and observations: A project's IRR represents the return the project would generate when its NPV is zero or the discounted value of its cash inflows equals the discounted value of its cash outflows-when the cash flows are discounted using the project's IRR. The level of risk exhibited by Project Lambda is the same as that exhibited by the company's average project, which means that Project Lambda's net cash flows can be discounted using Cold Goose's 8% WACC. and its NPV is Given the data and hints, Project Lambda's initial investment is dollar). (rounded to the nearest whole A project's IRR will if the project's cash inflows increase, and everything else is unaffected. . A project's IRR represents the return the project would gerecta NPV is zero or the discounted value of its ca equals the discounted value of its cash outflows-when th $10,651,535 discounted using the project's IRR. The level of risk exhibited by Project Lambda is the same $10,192,963 d by the company's average project, which Project Lambda's net cash flows can be discounted using WACC $10,346,848 $11,872,718 and its NPV is (round Given the data and hints, Project Lambda's initial investment is dollar). enerate when its NPV is zero or the discounted.lue of its cash inflows the cash flows are discounted using t $1,434,080R e as that exhibited by the company's $1,602,795 ct, which means that Cold Goose's 8% WACC. $1,518,438 $1,687,153 = and its NPV is (rounded to the nearest whole increase decrease moda's initial investment is and its NPV is Given the data and dollar). stay the same A project's IRR will if the project's cash inflows increase, and everything else is unaffected