Briar Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net cash flow of $219,000. The equipment will have an initial cost of $1,219,000 and an 8-year useful life. The salvage value of the equipment is estimated to be $219,000. Briars cost of capital is 8%. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1)

Note: Use appropriate factor from the PV tables.

Required:

1. What is the accounting rate of return?
2. What is the payback period?
3. What is the net present value?
4. What would the net present value be with a 13% cost of capital?
5. Based on the NPV calculations, what would be the equipment's internal rate of return?