You are evaluating two different machines.

The Alpha $1$ has an initial cost of $$450,000$ with a five$-$year life that will be depreciated down to zero using the straight$-$line method. The machine is expected to save the company $$125,000$ in operating costs $($pre$-$tax$)$ each year it is in operation. Assume the machine can be sold for $$25,000$ at the end of its useful life. The Alpha $2$ costs $$350,000,$ has a seven$-$year life that will be depreciated down to zero using straight$-$line method. Alpha $2$ will only save the company $$75,000$ per year $($before taxes$)$ but will have a salvage value of $$35,000$ at the end of its life. If your tax rate is $23$ percent and your discount rate is $9$ percent, compute the NPV and IRR for both machines.

Which do you prefer?