The NPV and IRR methods are interrelated and are sometimes used together to make capital budgeting decisions. Consider this case: The project has the same risk as the firm's average project. Although you don't know the project's initial cost, you have been told that the project has an IRR of 13.2%. Your boss wants to accept the project because the project's IRR exceeds the WACC of 7.00%, but another manager has mentioned that the NPV should be considered. Although you do not know the value of the project's initial investment, your boss would like you to evaluate a project with the following cash inflows: Year Cash Flow You plan to start the calculations by estimating the initial investment using information available to you. IRR is the cost of capital at which NPV equals $0. Using this information, the initial investment of the project turns out to be Year 1 Year 2 $325,000 $425,000 $450,000 $450,000 Year 3 Year 4 How much value does this project create for the firm? $182,552 $200,807 $173,424 $155,169 You plan to start the calculations by estimating the initial investment using information available to you. IRR is the cost of capital at which NPV equals $0. Using this information, the initial investment of the project turns out to be $1,214,859 How much $1,203,035 project create for the firm? $1,246,815 $1 $1,291,375