Chapter 11 Assignment The net present value (NPV) and internal rate of return (IRR) methods of investment analysts are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Blue Hamster Manufacturing Inct Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of its planning and financial deta when both its main and its beckup servers crashed. The company's co remembers that the intemal rate ofreturn (mR) of Project Zeta is 14.6%, but he can't recall how much Blue Hamster originally invested in the project nor the project's net present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Zeta. They are: Year Cash Flow Year 1 $1,800,000 Year 2 $3,375,000 Year 3 $3,375,000 Year 4 $3,375,000 esked you to compute Project Zeta's initial investment using the information currently available to you. He has offered the following suppestions and observations: 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 IRR. A The level of risk exhibited by Project Zeta is the same as that exhibited by the company's average project, which means that Project Zeta's net cash flows can be discounted using Blue Hamster's 7% WACC. Given the data and hints, Project Zeta's initial investment is (rounded to the nearest whole dollar) and its NPV is A project's IRR will if the project's cash intfiows increase, and everything else is unaffected. Type here to search