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The mayor of Trenton is considering the purchase of a new computer system for the city's tax department. The system costs $81,000 and has an

The mayor of Trenton is considering the purchase of a new computer system for the city's tax department. The system costs $81,000 and has an expected life of five years. The mayor estimates the following savings will result if the system is purchased:

Year Savings
1 $ 26,000
2 25,000
3 30,000
4 21,000
5 10,000

What can be said about the computer system's internal rate of return if the net present value at 13% is positive? Trenton uses a 11% discount rate for capital-budgeting decisions.

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