The G. Rod Electronic Components Corporation is considering replacing a 10-year old machine that originally cost...

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The G. Rod Electronic Components Corporation is consideringreplacing a 10-year old machine that originally cost $37,500, has acurrent book value of $12,500 with five years of life left, and isbeing depreciated using the straight line method over its 15 yearlife with zero salvage value. The replacement machine beingconsidered would cost $100,000 and have a five year expected lifeover which it would be depreciated using MACRS of 5 year. At thetermination of 5 years the new machine is expected to have asalvage value of 35,000. Material efficiencies resulting from thereplacement would result in savings of $30,000 per year before taxand depreciation. Currently the old machine could be sold for$17,000. Assume a 34 percent marginal tax rate and required rate ofreturn of 15 percent.
a. Find the NPV of the replacement project.
b. Find the IRR of the replacement project.

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The G. Rod Electronic Components Corporation is consideringreplacing a 10-year old machine that originally cost $37,500, has acurrent book value of $12,500 with five years of life left, and isbeing depreciated using the straight line method over its 15 yearlife with zero salvage value. The replacement machine beingconsidered would cost $100,000 and have a five year expected lifeover which it would be depreciated using MACRS of 5 year. At thetermination of 5 years the new machine is expected to have asalvage value of 35,000. Material efficiencies resulting from thereplacement would result in savings of $30,000 per year before taxand depreciation. Currently the old machine could be sold for$17,000. Assume a 34 percent marginal tax rate and required rate ofreturn of 15 percent.a. Find the NPV of the replacement project.b. Find the IRR of the replacement project.