Looks Pty ltd is a company that produces various consumer products and is presently considering the introduction of a new product line. The accounting value of total assets presently employed by the company is R50 million and is expected to remain at this level if the company rejects the proposal to introduce a new product line. Net Income before tax from existing operations is R10 million per annum, and this income level would not be affected by the introduction of a new product line. The new product line would require an investment in plant and machinery amounting to R10 million. The company would be required to invest another R6, 25 million in working capital now and a further R1, 05 million in working capital in a years time. The new product is expected to result in low sales in the first two years, but sales are expected to be high in the subsequent 4 years. The project is expected to have a life of 6 years. The residual value of the plant and equipment at the end of the 6th year is expected to be R2 million. The investment in working capital of R7, 3 million will also be recovered at the end of the project. The company has a cost of capital of 15%. The board of directors of the company has approached you and has asked you to provide a comprehensive report on the methods that they can use to evaluate this project. The board of directors was considering using three 3 methods namely, payback period method, net present value method (NPV) and internal rate of return method (IRR), in order to evaluate the viability of the new product line.

Calculate using the Internal Rate of Return method?