Reference no: EM131881995

Andrusco Corp's new vice president of Finance, Mr Rufus, has discovered that a production machine authorized for purcahse last year y his fired predecessor Mr. Miranda, is not functionng well on the production floor. Therefore he has decided and recieved approval to replace this machine with a new one. The new machine will cost 50,000, has a 5 year economic life, will use DDB depreciation, and a residual value of 5,000$. The old machine was using SYD depcration with a 5 year life with 2000$ salvage value and originally cost 40,000. The old machine can be sold in todays market for 30,000. The US president has wisely reinstituted the Investment Tax Credit for corporations that had been outlawed. New unadjusted cash flows from the new equipment will be 20,000; 10,000; 10,000; 10,000; and 15,000. Maintenence cost will be $1000 in both years 2 and 4. A commercial crane will have to be hired to place the new equipment on t he shop floor to the tune of $2500. the company can maintain funds by selling junk bonds at 12.4% over the current inflation rate. is this a good decision by the vice president of finance? whether yes or no to the above questions, the hard-nosed, inconsiderate CEO of the company, pres. andrisco, wants to know what the IRR of he new investment.