Please help me to explain where is the $19\%$ in the question bn $=8$ T $=25\%$ r$=$I$/$Y $=13\%$ d $=20\%$

Expected Aftertax Present Value

Year Event Cash Flow Cash Flow @ $13\%$

$0$ Purchase machine $$(525,000)$ $$(525,000)$

$1-8$ Cash flow $165,000123,750593,848$

$=$PV$(13\%,8,123750,0)$

$4$ Capital upgrade $(105,000)(64,398)$

$=$PV$(13\%,4,0,105000)$

$8$ Salvage $30,00011,285$

$=$PV$(13\%,8,0,30000)$

$0$ CCA pool $($PV of tax savings$)$

$"$PV $"("$CCA$")=["$C$-""$S$"\_"$PV$"](("$d$""$T$"\_$C$)/($r$+$d$))((1+\mathrm{.}5$r$)/(1+$r$))$

NPV $=$ $ $98,289=-525000+59384864398+11285+82554$

Note: The $$60,000$ deposit is a sunk cost and is irrelevant for this decision.

Expected Aftertax Present Value

Year Event Cash Flow Cash Flow @ $19\%$

$0$ Purchase machine $$(525,000)$ $$(525,000)$

$1-8$ Cash flow $165,000123,750489,352$

$4$ Capital upgrade $(105,000)(52,360)$

$8$ Salvage $30,0007,460$

$0$ CCA pool $($PV of tax savings$)$

NPV $=($$$13,317)$

$$

$$98,289$ PV @ $13\%$ $$98,289$ PV @ $13\%$

$(13,317)$ PV @ $19\%0,0000($Cost$)$

$$111,606$ $$98,289$

This is an approximation.

This is calculated @$13\%.$

Jagged Pill should purchase the new machine. Value will increase by $$98,289($the NPV$),$ the IRR exceeds the cost of capital and the PI exceeds $1.$