Blue Moose Home Builders is evaluating a proposed capital budgeting project {project Sigma} that will require an initial investment of $85D. Blue...

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Blue Moose Home Builders is evaluating a proposed capital budgeting project {project Sigma} that will require aninitial investment of $85D.Dflfl. Blue Moose Home Builders has been basing capital budgeb‘ng decisions on a project's NW; however. its new CFO wants to start using the IRR method for capital budgeting decisions. The CFC! says that the IRR is a better methodbecause returns in percentage form are easier to understand and compare to required returns. Blue Moose Home Builders's WACC is 3%. 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 projectYear Cash Flow Sigma’s IRR? Year 1 $3flfl.flflfll — O 13.43%Year 2 $425rflflfl O 25 15%TBBFE $¢Uflrflflfl 0 22325-5,Yearti- $425,Dflfl 0 215395: ficce9£ If this is an independent project, the IRR method states that the firm should Re— 23:6