An assebly operation at a software company currently requires $102,000 per year in labor costs. A robot canbe purchased and nstalled to automate this operation, and the robot will cost $191,000 with no MV at the end of its 10-year life. The robot, if acquired, will be depreciated using SL depreciation to a terminal BV of zero ater 10 years. Maintenance and operation expenses of the robot are estimated to be $73,000 per year. The company has an effective income tax rate of 50%. Invested capital must earn at least 8% after income taxes are taken into account.

(a) Use the IRR method to determine if the robot is a justifiable investment.

(b) If MACRS (seven-year recovery period) has been used in Part (a), would the after-tax IRR be lower or higher than your answer to Part (a)?