3. Understanding the IRR and NPY The net present value (NPV) and internal rate of return (IRR) methods af investment analyeis are interrelated and are sametimes used together to make capital budgeting decisions. Consider the case of Cute Camel Wooderaft Company: Last Tuesday, Cute Camel Wooderaft Company loat a portion af its planning and financial dsta when both its main and its bsciop servers crached. The compsny's CFD remembers thst the internal rate af retum (IFR) of Project Omicron is 11.3% but he can't recall haw much Cute Camel ariginally invested in the project nor the project's net present value (NPV). However, he found a note that detalled the annusl net cash flaws expected to be generated by Praject Dmicron. They are: The CFO has asked you to compute Project Omicron's in tial investment using the information currently avsilable to you. He has offered the following suggestions and observations: - A project's 1RR represents the return the project would generate when its NPV is zero or the discounted value af its cash infiows ecusls the discounted value af its cash outflows-when the cach flows are ciscounted using the praject's IFR. - The level af risk eahibited by Projact Omicon is the same as that exhibited by the company's average project, which mesns that Praject Dmicron's net cash flows can be discounted using Cute Camel's TYla WACC. Given the data and hints, Project Omicron's initisl invectment is , and its NPV is (rounded to the nearest whole dollar). A project's IFR. will If the project's cash infiows increase, and everything else is unaffected