Cullumber Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 10 percent discount rate for production systems.

YearSystem 1System 2

0

-$14,240-$45,926

1

14,26 132,130

2

14,26132,130

3

14,26 132,130

Compute the IRR for both production system 1 and production system 2

Which has the higher IRR?

Which production system has the higher NPV?