A businessisconsidering a proposal to install a new deviceintheir small factory. The device costs $23,000 and will save the business $400 per monthinexpenses. Assume

that the device will last for 8 years, that the savings remain constant and are at the end of each month. The first saving commencesinone month from now. The effective annual interest rateis12.6825%, and the effective monthly interest rateis1%.

a) Calculate the Net Present Value (NPV) of the proposal.

b) Calculate the payback period for the device (in years to two decimal places).

c) Describe how you would reach a decision about whether to make this purchase, using the:

1. Payback period method
2. Net Present Value method

d)Inthis example, describe whether the project internal rate of returnislikely to be greater or less than 12.6825% p.a.(effective) and explain why.