3. Understanding the IRR and NPV 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. Fuzzy Button Clothing Compsny lest a portion of its planning and financial data when its server and its backup server crashed, The company's CFo remembers that the internal rate of return (IRR) of Project Lambdo is 14.60%, but he can't recali how much Furty Button originaliy invested in the project nor the project's net present value (NFV). Howeveg, he found a note that contained the annual Bet cash flows axpected to be genterated by Project Lambds. They are: The CFO has asked you to compute Project Lambda's initial investment using the information currently avallable to you. He has offered the following suggestions and observations; The CFO has asked you to compute Project Lambda's initial investment using the information currentiy 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 tRR. - 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 fiows can be discounted using Fuzzy Button's 9.00% desired rate of return. Given the data and hints, Project Lambda's initial investment is , and its NPV is (both rounded to the nearest whole dollar). 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 o equals the discounted value of its cash outfiows - when t - The level of risk exhibited by Project Lambda is the same Project Lambda's net cash flows can be discounted using Given the date and hints, Project Lambda's initial investment is whole dollar]. s NFV is zero or the discounted value of its cash inflows e discounted using the project's IRR. ad by the company's average project, which means that 9.00% desired rate of raturn. has asked you to compute Project Lambda's initial investment using the information currently avaliable to you. He has offered the following tions and observations: project's IRR represents the return the project would generate when its NPV is zero or the diarnumtad wxlue of its cash infiows quals the discounted value of its cash outflows - when the cash flows are discounted using RR. The level of risk exhibited by Project Lambda is the same as that exhibited by the company ict, which means that roject Lambda's net cash fiows can be discounted using Fuzzy Button's 9,00% desired rate he data and hints, Project Lambda's initial investment is , and its NPV is (both rounded to the nearest boliar). continue without saying 3. Understanding the IRR and NPV 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. Fuzzy Button Clothing Compsny lest a portion of its planning and financial data when its server and its backup server crashed, The company's CFo remembers that the internal rate of return (IRR) of Project Lambdo is 14.60%, but he can't recali how much Furty Button originaliy invested in the project nor the project's net present value (NFV). Howeveg, he found a note that contained the annual Bet cash flows axpected to be genterated by Project Lambds. They are: The CFO has asked you to compute Project Lambda's initial investment using the information currently avallable to you. He has offered the following suggestions and observations; The CFO has asked you to compute Project Lambda's initial investment using the information currentiy 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 tRR. - 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 fiows can be discounted using Fuzzy Button's 9.00% desired rate of return. Given the data and hints, Project Lambda's initial investment is , and its NPV is (both rounded to the nearest whole dollar). 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 o equals the discounted value of its cash outfiows - when t - The level of risk exhibited by Project Lambda is the same Project Lambda's net cash flows can be discounted using Given the date and hints, Project Lambda's initial investment is whole dollar]. s NFV is zero or the discounted value of its cash inflows e discounted using the project's IRR. ad by the company's average project, which means that 9.00% desired rate of raturn. has asked you to compute Project Lambda's initial investment using the information currently avaliable to you. He has offered the following tions and observations: project's IRR represents the return the project would generate when its NPV is zero or the diarnumtad wxlue of its cash infiows quals the discounted value of its cash outflows - when the cash flows are discounted using RR. The level of risk exhibited by Project Lambda is the same as that exhibited by the company ict, which means that roject Lambda's net cash fiows can be discounted using Fuzzy Button's 9,00% desired rate he data and hints, Project Lambda's initial investment is , and its NPV is (both rounded to the nearest boliar). continue without saying