Farrior Fashions needs to replace a beitloop attacher that currently costs the company $50,000 in annual cash operating costs. This machine is of no use to another company, but it could be sold as scrap for $3,128. Managers have identified a potential replacement machine, Euromat’s Model HD-435.

The HD-435 is priced at $90,000 and would cost Farrior Fashions $30,000 in annual cash operating costs. The machine has a useful life of 8 years, and it is not expected to have any salvage value at the end of that time.

Required

a. Calculate the net present value of purchasing the HD-435, assuming Farnor Fashions uses a 12% discount rate.

b. Calculate the internal rate of return on the HD-435.

c. Calculate the payback period of the HD-435.

d. Calculate the accounting rate of return on the HD-435.

e. Should Farrior Fashions purchase the HD-435? Why or why not?