Your company is considering an expansion project. The proposed project has the following features:

• The project has an initial cost of $300,000 -- this is also the amount which can be depreciated in Years 1 4, at a rate of 33%, 45%, 15%, and 7%, respectively.
• If the project is undertaken, at Year 0 the company will need to increase its inventories by $50,000, and its accounts payable will rise by $10,000. At Year 1 the firm will increase its inventories by another $25,000, and its accounts payable will increase by another $5,000. This net operating working capital will be recovered at the end of the projects life, Year 5.
• If the project is undertaken, the company will realize an additional $500,000 in sales over each of the next five years (Years 1-5). The companys operating cost (not including depreciation) will be equal to 60 percent of sales each year.
• The companys tax rate is 40 percent.
• At Year 5, the projects economic life is complete, but it will have a salvage value of $60,000.
• The projects WACC = 12 percent.

Given this data, determine the projects internal rate of return (IRR).

a) 34.11%

b) 30.60%

c) 32.94%

d) 35.28%

e) 31.77%