Signs For Fields Machinery Ltd. is considering the replacement of some technologically obsolete machinery with the purchase of a new machine for $72,000. Although the older machine has no market value, it could be expected to perform the required operation for another 10 years. The older machine has an unamortized capital cost of $27,000.

The new machine with the latest in technological advances will perform essentially the same operations as the older machine but will effect cost savings of$17,500 per year in labour and materials. The new machine is also estimated to last 10 years, at which time it could be salvaged for $11,500. To install the new machine will cost $7,000. 

Signs For Fields has a tax rate of 30 percent, and its cost of capital is 15 percent. For accounting purposes, it uses straight -line amortization, and for tax purposes its CCA is 20 percent.
a. Should Signs For Fields Machinery purchase the new machine?
b. If the old machine has a current salvage value of $9,000, should Signs For Fields purchase the new machine?
c. Calculate the IRR and PI for part a.