STU Manufacturing is evaluating whether to replace old equipment The new equipment costs $800,000 and will reduce annual operating costs by $150,000 The equipment has a useful life of 10 years and a salvage value of $100,000 The companys cost of capital is 9 Requirements Calculate the annual depreciation expense using the straight line method Determine the Net Present Value (NPV) Calculate the Internal Rate of Return (IRR) Provide a recommendation based on the financial metrics

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Question: STU Manufacturing is evaluating whether to replace old equipment. The new equipment costs $800,000 and will reduce annual operating costs by $150,000. The equipment has

STU Manufacturing is evaluating whether to replace old equipment. The new equipment costs $800,000 and will reduce annual operating costs by $150,000. The equipment has a useful life of 10 years and a salvage value of $100,000. The company’s cost of capital is 9%.

Requirements:
- Calculate the annual depreciation expense using the straight-line method.
- Determine the Net Present Value (NPV).
- Calculate the Internal Rate of Return (IRR).
- Provide a recommendation based on the financial metrics.

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