Question

Last Tuesday, Fuzzy Button Clothing Company lost a portion of its planning and financial data when its server and its backup server crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Lambda is 13.20%, but he can’t recall how much Fuzzy Button originally invested in the project nor the project’s net present value (NPV). However, he found a note that contained the annual net cash flows expected to be generated by Project Lambda. They are:

Year	Cash    Flow
1	$2,200,000
2	4,125,000
3	4,125,000
4	4,125,000

The CFO has asked you to compute Project Lambda’s initial investment using the information currently available to you. He has offered the following suggestions and observations:

•	A 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.
•	The level of risk exhibited by   Project Lambda is the same as that exhibited by the company’s average   project, which means that Project Lambda’s net cash flows can be discounted   using Fuzzy Button’s 8.00% desired rate of return.

Given the data and hints, Project Lambda’s initial investment is    , and its NPV is    (both rounded to the nearest whole dollar).