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DigCo is considering the purchase of a backhoe for the pipeline contracting firm. The machine will cost $110,000, last six years with a salvage value

DigCo is considering the purchase of a backhoe for the pipeline contracting firm. The machine will cost $110,000, last six years with a salvage value of $20,000, and reduce annual maintenance, insurance, and labour costs by $30,000 per year. The after tax MARR is 9% and DigCo's corporate tax rate is 55% (a) What is the exact after tax IRR for this investment? (5 marks) (b) Should DigCo buy the backhoe? (2 marks)

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2. DigCo is considering the purchase of a backhoe for the pipeline contracting firm. The machine will cost $110,000, last six years with a salvage value of $20,000, and reduce annual maintenance, insurance, and labour costs by $30,000 per year. The after tax MARR is 9% and DigCo's corporate tax rate is 55% (a) What is the exact after tax IRR for this investment? (5 marks) (b) Should DigCo buy the backhoe? (2 marks)

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