Lugar Industries is considering an investment in a new machine with the following information:

Use this information for the next 3 questions:

Machine cost 250,000

Salvage value 50,000

Life 5 years

Working Capital $0 (no working capital needed) Net operating expense savings:

End of Year 1 $ 50,000

End of Year 2 $ 90,000

End of Year 3 $110,000

End of Year 4 $120,000

End of Year 5 $120,000

WACC 10%

Tax rate 40%

Assumed salvage value of the machine at end of 5 years is $50,000 (You will sell this machine at the end of the project for $50,000)

If Lugar buys the machine, calculate the following answers. Remember to include the impact of depreciation, taxes, and salvage value.

Based on the information, the NPV of this project would be: (Round you answer to the nearest two decimal places.

Based on the above information, calculate the IRR.

Based on your calculations, should Lugar buy the machine?