STU Manufacturing is evaluating whether to replace old equipment. The new equipment costs $800,000 and will reduce annual operating costs by $150,000. The equipment has a useful life of 10 years and a salvage value of $100,000. The company’s cost of capital is 9%.

• Requirements:
  • Calculate the annual depreciation expense using the straight-line method.
  • Determine the Net Present Value (NPV).
  • Calculate the Internal Rate of Return (IRR).
  • Provide a recommendation based on the financial metrics.