Backyard boys is considering the purchase of a new toy-making machine that will increase revenues by $50,000 a year and annual costs by $10,000. The new machine will replace an outdated machine with a current book vale of $10,000 but if scrapped now can only be sold for $6,000.The new machine will cost $100,000 with shipping and installation fees of $10,000. The machine will be depreciated via 5-year MACRS schedule (20.0%, 32.0%, 19.2%, 11.5%, 11.5%, 5.8%). The firm estimates that the new machine can be sold at the end of its five-year life for $20,000. The new machine will necessitate an investment of $30,000 in working capital that will be fully recovered at the end of the project. Tipping Toys has a 10% cost of capital and a corporate tax rate of 40%.What is the IRR of the project?14.85%
Backyard boys is considering the purchase of a new toy-making machine that will increase revenues by $50,000 a year and annual costs by $10,000. The new machine will replace an outdated machine with a current book vale of $10,000 but if scrapped now can only be sold for $6,000.The new machine will cost $100,000 with shipping and installation fees of $10,000. The machine will be
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