Due Tomorrow at 4 PM COT Attempts: 11. Internal rate of return (IRR) Score: 17 Aa AaB up-front cost and subsequent cash flows. Consider the case of Purple Whale Foodstuffs Inc.: Consider the following case: Purple Whale Foodstuffs Inc. is evaluating a proposed capitai budgeting project (project Sigma) that will require an initial investment of $800,000. Purple Whale Foodstuffs Inc. has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Purple whale Foodstuffs Inc.'s WACC is 7%, and project Sigma has the same risk as the firm's average project. The project is expected to generate the following net cash flows Which of the following is the correct calculation of project Sigma's IRR Year Cash Flow Year 1 $375,000 Year 2 $500,000 Year 3 $425,000 Year4 $500,000 40.64% 34,54% Q 36.58% 38.61% If this is an independent project, the IRR method states that the firm should 8