Calculate the irr

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

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 above information, calculate the IRR. (Round you answer to the nearest two decimal places. Do not use %.

Reference no: EM132998764

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