1 (25 points) a) Your firm is contemplating the purchase of a new $500,000 computer based oder entry system. The system will be depreciated straight line to zero over its five-year it will be worth $50,000 at the end of that time. You will save $150,000 before taxes per year in order processing costs, and you will be able to reduce net working capital by $70,000. If the tax rate is 30 percent, what is the IRR for this project? b) in the previous problem you used straight line depreciation. This time use the MACRS 3-yea depreciation schedule and answer the question again (The project is still 5 years long 2 (25 points) Your company is considering purchasing one of two machines Machine A costs $2,600,000 and will last for six years. Variable costs are 35% of sales and fixed costs are $195,000 per year. Machine B costs 55,200,000 and will last for nine years. Variable costs are 30% of sales and fored costs are $230,000 per year Your sales, regardless of the machine used will be $10 million per year. Your required return is 10% and your tax rate is 35. Both machines will be depreciated straight line to zelo over its useful life Both machines will have a salvage value at the end of its life of 10% of the original purchase price Calculate the EAC for both machines and determine which machine should be chosen 115 Points Given the following information for Watson Power Co, find the WACC Assume the company's tan 35 Dett. 10,000 percent coupon bondeovnstanding with 20 years to maturity, eting at $1100 Coupon payants are made once a year Common stock 495.000 shares outstanding seline for per share recently vidend of $400 and is an expected growth rate of 5 stered ocks: 18,000 wes of sx preturned mocks outstandine currently selline per 18 ty