Question $2$

$3$ pts

You are considering replacing an old machine with a new machine. The new machine will generate savings of $$50,000$ per year, have a $5$ year life and no salvage value. However the initial cost is $$150,000.$ The old machine had an initial cost of $$100,000$ with a life of $10$ years, and an after tax salvage value of $$10,000$ at the end of its useful life. Annual depreciation of this machine is $$9,000$ and it was purchased $5$ years ago and has a book value today of $$55,000.$ Its current value is $$65,000.$

What is the NPV of the savings generated by the new equipment? Assume $R=10\%$ Tax rate: $21\%$

Question $3$

$3$ pts

What is the IRR of the new equipment discussed in Question $2?$ Use the Cash Flows from Slide $52$ or as you calculated for Question $2.$