Diamond Company is considering purchasing a machine that would cost $756,000 and have a useful life of 8 years. The machine would reduce cash operating costs by $132,632 per year. The machine would have a salvage value of $151,200 at the end of the project. Assume the rate of NPV is 15%.
Compute:
Net present value
Internal rate of return
Profitability index
Payback period
Simple rate of return
Should the company purchase the machine? Why or why not?