A worldwide cosmetics company can upgrade the quality of one of its products by purchasing new equipment at a cost of $155,000. The new equipment would replace old equipment that has a current market value of $23,000.

The old equipment originally cost $180,000 and was three quarters depreciated. If the old equipment was used for an additional 12 years, its salvage value at that time would be $5,000.

The new equipment has an expected life of 12 years. Its salvage value is estimated at $30,000.

By upgrading the quality of this product, the company would be able to increase the sale price. As a result, the operating income before tax will increase by $20,000 per year for the first 3 years, and by $25,000 per year during the last 9 years.

The companys tax rate is 40% and its cost of capital after tax is 15%. Depreciation is on straight line basis. Required Compute the net present value (NPV) and the internal rate of return (IRR) for the investment and state whether the company should proceed with the investment.