Answer below:

Tax Rate: 25%

WACC 22%

machine will be $25,000 upfront, NWC

Option 2: Machine HS: Machine HS will provide an annual cost savings of $260,000 per year. Equipment Cost/Depreciation Basis is S680,000 Physical life of 6 years MACRS depreciation for 5-year asset lite (20%. 32%. 19.2%, 11.52%. 11.52%, 5.76%) Note: Neither machine would change revenues, but is expected to reduce costs per year in before-tax operating costs. Therefore, use the tax shield approach when calculating operating cash flow for each year. a. Which machine gives the highest NPV? b. What is the NPV. IRR and MIRR for the machine you selected in part a. Option 1: Machine FY: Machine FY will provide an annual cost savings of $320,000 per year. Equipment Cost/Depreciation Basis is $822,000 Physical life of 6 years MACRS depreciation for 5-year asset life (20%, 32%. 19.2%. 11.52%, 11.52%, 5.76%)