ABC Corp. is considering purchasing a machine with a cost of $$65,000.$ The machine's lifespan is $4$ years, and it has no residual value. The physical plant manager estimates that using this machine will result in cost savings over the next four years as follows:

Year Amount

$1$ $$25,000$

$2$ $$22,000$

$3$ $$21,000$

$4$ $$20,000$

Total $$88,000$

ABC uses a required rate of return of $18\%$ to evaluate its investment projects $($or capital budget$).$ Assume two things: $1)$ the effect of taxes can be ignored in the analysis, and $2)$ all cash flows are generated at the end of the year except for the initial investment.

Required:

Calculate the following metrics for this investment.

Net Present Value $($NPV$)$

Payback Period

Internal Rate of Return $($IRR$)$ using the interpolation method

Accounting Rate of Return. Assume straight$-$line depreciation. Use the average annual cost savings in operational costs in the numerator of this computation. $($Accrual accounting rate of return based on net initial investment$).$