A business invested $12,000 in a piece of equipment which helped reduce labor costs by $2,000 annually and reduced rejects by an estimated $1,800 annually. After 5 years, the machine has to be replaced by a new machine for the same cost. However, the old machine could be sold as scrap for $750.
a. Calculate the rate of return for this venture.
b. If the company habitually earns 12% rate of return on their investment, calculate the net present value for the venture.