The management of Architect Services Inc. would like to purchase a blueprint machine for \($50,000.\) The machine is expected to have a life of four years, and a salvage value of \($10,000.\) Annual maintenance costs will total \($14,000.\) Annual savings are predicted to be \($30,000.\) The company’s required rate of return is 11 percent.

Required

a. Use Excel to calculate the net present value and internal rate of return in a format similar to the one in the Computer Application box.

b. Should the company purchase the blueprint machine? Explain.

c. Assume the manager of the company intentionally inflated the projected annual savings so that the proposal would be accepted. The proposal would otherwise have been rejected. 

Explain how the company’s use of a post-audit would help to prevent this type of unethical behavior.