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. 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 its server and its backup server crashed. The rate of return (IRR) of Project Gamma is 11.30%, but he can't recall how much Cold Goose originally pany's CFO remembers that the internal com invested in the project nor the project's net present value (NPV). However, he found a note that contained the annual net cash flows expected to be generated by Project Gamma. They are: Year Cash Flow 1 $1,600,000 2 3,000,000 3 3,000,000 4 3,000,000 using the information currently available to you. He has offered the following The CFO has asked you to compute Project Gamma's initial investment suggestions and observations