Question $9$

Your shop foreman proposes buying a new widget stamping machine. The machine will cost

$$220,000$ and will save an estimated $$74,000$ per year in costs for its lifespan of $3$ years. It

will be eligible for bonus depreciation and have a resale$/$salvage value of $$60,000.$

The machine will also require maintenance capex of $$5,000$ per year in years $1-3.$ That capex

will be depreciated in the year it is spent.

If your firm has a tax rate of $21\%,$ what is the IRR of the proposal?

$($You can use the $3$ year capital budgeting worksheet from Module $5).$

$4\mathrm{.}5\%$

$7\mathrm{.}6\%$

$12\mathrm{.}0\%$

$8\mathrm{.}9\%$

$6\mathrm{.}1\%$ Your shop foreman proposes buying a new widget stamping machine. The machine will cost $$220,000$ and will save an estimated $$74,000$ per year in costs for its lifespan of $3$ years. It will be eligible for bonus depreciation and have a resale$/$salvage value of $$60,000.$

The machine will also require maintenance capex of $$5,000$ per year in years $1-3.$ That capex will be depreciated in the year it is spent.

If your firm has a tax rate of $21\%,$ what is the IRR of the proposal?

$($You can use the $3$ year capital budgeting worksheet from Module $5).$