A firm is considering an investment on a new machine with a price

A firm is considering an investment on a new machine with a price
A firm is considering an investment on a new machine with a price of 18 million to replace its existing machine. The current machine has a book value if 6 million and a market value of 4.5 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new one it expects to save 6.7 million in operations cost each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also needs an investment of 250,000 in net working capital. The required return on the investment is 10 percent, and the tax rate is 39 percent. What are the NVP and IRR of the decision to replace the old machine?

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