Whispering Winds Fashions needs to replace a beltloop attacher that currently costs the company $48,000 in annual cash operating costs. This machine is of no use to another company, but it could be sold as scrap for $3,500. Managers have identified a potential replacement machine, Euromat’s Model HD-435.

The HD-435 is priced at $47,892 and would cost Whispering Winds Fashions $38,000 in annual cash operating costs. The machine has a useful life of 12 years, and it is not expected to have any salvage value at the end of that time.

1. (a) Calculate the net present value of purchasing the HD-435, assuming Whispering Winds Fashions uses a 16% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)

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

3. Calculate the payback period of the HD-435. (Round answer to 4 decimal places, e.g. 15.2515.)

4. Calculate the accounting rate of return on the HD-435. (Round answer to 2 decimal places, e.g. 11.25%.)

5. Should Whispering Winds Fashions purchase the HD-435?