2. Cement Inc. is considering an investment opportunity that requires an initial outlay equal to $575,000. In years 1 and 2 the net cash flows are expected to equal $500,000. The required rate of return is 25% p.a. 2.a Given that the Cement Inc.'s criterion whether to invest or not is the project's internal rate of return (IRR), should the 2.b After observing the managers' decision, a shrewd businessman offers the managers of Cement Inc. the following modified project. The businessman offers that the firm will pay the initial outlay $575,000 only in year 2 and receive the $500,000 in years 0 and 1. As a compensation for receiving this offer, the businessman proposes that the firm pay him $1,100,000 in year 3. Cement Inc.'s CFO argues that according to the IRR criterion the proposal is profitable since the 25% required rate of return is lower then the new IRR for this investment. Is the CFO correct in his argument that the required rate of return is lower then the IRR? Does this decision rule lead to optimal investment by the firm? firm's managers invest in this project? Is the IRR criterion the correct decision rule in this case?