ABC Folding Box Company Inc. is considering a project, which is the replacement of the existing gluing machine with the new one, purchasing a new gluing machine. The new gluing machine costs $50,000 and requires installation costs of $2,500. This outlay would be partially offset by the sale of the existing gluer. The existing gluer is four years old, being depreciated using a five-year recovery schedule and can currently be sold for $15,000. Over its five-year life, the new machine will continue to have the same sales figure with the existing one but reduces operating costs by $17,000 per year. Training costs of employees who will operate the new machine will be a one-time cost of $5,000 which should be included in the initial outlay. The new machine will be depreciated using a five-year recovery period. The firm has a 15 percent cost of capital and a 40 percent tax on any income and capital gains.

1. Calculate the payback period for the project. Calculate the present value of the projects annual cash inflows
2. Calculate the net present value of the project Try to guess the approximate internal rate of return (IRR) for the project. Do not calculate the exact number