XYZ Inc. is evaluating a capital project using the internal rate of return method. The project has an initial cash outflow of $625,000 and the annual after-tax cash inflows for the project are below. For capital projects management requires a rate of return of 12.0%.

Cash inflows are as follows: year 1 $125,000, year 2 $125,000, year 3 $175,000, year 4 $175,000 year 5 $175,000, year 6 $200,000.

What is the internal rate of return (IRR) of the project (round to two decimal places)?

Group of answer choices

13.17%

12.5%

14.53%

13.87%