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Question
Tech Engineering Company is considering the purchase of a new machine to replace an existing one. The old machine was purchased 5 years ago at a cost of $20,000, and it is being depreciated on a straight line basis to a zero salvage value over a 10-year life. The current market value of the old machine is $14,000. The new machine, which falls into the MACRS 5-year class, has an estimated life of 5 years, it costs $30,000, and Tech plans to sell the machine at the end of the 5th year for $1,000. The new machine is expected to generate before-tax cash savings of $3,000 per year. The company's tax rate is 40 percent. What is the IRR of the proposed project?
a. 4.1%
b. 2.2%
c. 0.0%
d. u22121.5%
e. u22123.3%
Answer
This answer is hidden. It contains 1369 characters.
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