A firm is considering two mutually exclusive projects. The first would involve a partial upgrade to

the machinery in its largest factory $($it would upgrade some but not all of the machinery$).$ Doing

this would cost $$12$ million initially, but would increase production, and allow the firm to

increase its cash flows by $$2$ million, $$6$ million, $$6$ million, and $$4$ million across each of the next

four years, respectively. Based on these cash flows, what is the internal rate of return $($IRR$)$ of

this project? If the required return for this project were $13\%,$ would this project, on its own, be a

good idea for the firm?

IRR $=16\mathrm{.}90\%$; the project is good.