ABC Ltd is contemplating spending $300,000 on equipment to manufacture a new type of hard disk. The marginal revenue generated by the equipment is $105,000 in the first year, growing at a compound rate of 5% per year after that. The marginal cash costs will be $55,000 in the first year and are expected to grow at a compound rate of 4% after that. Tax is paid or saved, at the rate of 25%, in the year of the "event", giving rise to that tax liability or tax saving. The cost of capital (discount rate) is 7.5%.

This equipment will require major maintenance of $15,000 at the end of year 3 and another $25,000 at the end of year 5. The expected life of the equipment is 15 years, and the salvage value at that time is estimated to be $24,000. Allbob uses the reducing balance method of depreciation, and the depreciation rate used is 20%. However, Allbob is considering selling off the equipment earlier to its subsidiary Catbob at the end of year 8 instead for $60,000.

Required:

Calculate the NPV and IRR of this project. (Hint: Construct the cash flow from year 0 to year 15).