Cullumber Inc. wants to purchase a new machine for $44,300, excluding $1,500 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,200, and Cullumber Inc. expects to sell it for that amount. The new machine will decrease operating costs by $10,000 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value.

a) Determine the cash payback period.

b) Determine the approximate internal rate of return.

c) Assuming the company has a required rate of return of 8%, determine whether the new machine should be purchased.