A large brokerage company is assessing the introduction of a new computer system to improve

routing and execution of customer orders. The managing director wants to install a new Smart

Routing system, whereas another director prefers the Direct Routing system. Each machine

provides the same order$-$execution ability and can satisfy the broker's obligation to give investors

the best possible order execution. The initial cost of each system is $$180,000,$ but because of

differing software, maintenance, and processing requirements, estimates of the after$-$tax costs

of operation differ. These are as follows:

The company has an after$-$tax weighted cost of capital of $10\mathrm{.}45$ per cent.

A$)$ Can you determine the IRR for each project? Explain.

B$)$ Determine the NPV for each project. Which project does NPV suggest you recommend?

C$)$ Is NPV the correct tool with which to make your recommendations? Explain.

D$)$ Using an appropriate method, determine which system you would recommend to the

board. Identify the calculations that support your decision.