The Mighty Mouse Computer company is considering whether or not to install a packaging robot. The robot initial cost $460,000, shipping cost $30,000 and installation $10,000. The robot can be depreciated using MACRS as a 5-year asset. (MACRS depreciation rates for a five-year asset: 20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76%.) The robot is expected to last for five years, at which time management expects to sell it for parts for $100,000. The robot is expected to replace five employees in the shipping department, saving the company $150,000 each year. Mightys tax rate is 30%.

1. What is the internal rate of return of the robot investment?
2. What is the modified internal rate of return of the robot investment if the cash flows are reinvested at 5%?
3. If the cost of capital is 5%, should Mighty Mouse invest in this robot?