Question $5$

A $$69,000$ machine with a $6-$year class life was purchased $2$ years ago. The machine will now be sold for $$50,000$ and replaced with a new machine

costing $$91,000,$ with a $10-$year class life. The new machine will not increase sales, but will decrease operating costs by $$3,000$ per year. Simplified

straight line depreciation is employed for both machines, and the marginal corporate tax rate is $34$ percent. What is the incremental annual cash

flow associated with the project?

Question $6$

Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $$200,000,$ and installation

costs would amount to $$28,000.$ Also, $$10,000$ in net working capital would be required at installation. The machine will be depreciated for $3$ years

using simplified straight line depreciation. The machine would save the firm $$110,000$ per year in operating costs. The firm is planning to keep the

machine in place for $5$ years. At the end of the fifth year, the machine will be sold for $$20,000.$ Riverview has a cost of capital of $12\%$ and a marginal

tax rate of $34\%.$

What is the IRR of the project?

$9\mathrm{.}5\%$

$31\mathrm{.}3\%$

$14\mathrm{.}1\%$

$19\mathrm{.}7\%$

$28\mathrm{.}2\%$