It would have zero salvage value at the end of its life

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Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 5 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $1,150 delivered and installed, would also last for 5 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $325 per year. It would have zero salvage value at the end of its life. The firm's WACC is 11.10%, and its marginal tax rate is 28.10%. What is IRR? Answer is either: a). 15.81% b).15.43% c).12.75% d).13.26 e).14.28%.

Reference no: EM131451384

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