Question: Question 5 DEF Inc. is looking to replace an old machine with a new one. The old machine can be sold for $50,000, and its

Question 5

DEF Inc. is looking to replace an old machine with a new one. The old machine can be sold for $50,000, and its book value is $20,000. The new machine costs $150,000 and will have a 5-year life with no salvage value. The new machine will save $40,000 annually in operating costs. The tax rate is 35%. Calculate:

Initial investment after considering the sale of the old machine.
Annual after-tax savings.
Net Present Value (NPV) if the discount rate is 10%.
Internal Rate of Return (IRR).
Payback Period.

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