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Purple Whale Foodstuffs Inc. is evaluating a proposed capital budgeting project (project Sigma) that will...

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Accounting

Purple Whale Foodstuffs Inc. is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000.
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 8%, and project Sigma has the same risk as the firm's average project.
The project is expected to generate the following net cash flows:
\table[[Year,Cash Flow],[Year 1,$275,000
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