George is the manager of a division of Saxophone Corporation. Over the past three years, his division's performance has been outstanding, with significant increases in profits each year. As a result, George has been nicely rewarded with incentive bonuses at the end of each year, which are tied to profit performance. Also, because of his performance, he has received attention from top management as a prospect for promotion to their ranks if his outstanding performance continues Determined to achieve this goal, George makes it a point to review every capital budget request proposed by people within his division. He wants to make sure that any capital investment earns at least 10 percent on an after tax basis and that any capital investment pays back its investment in no more than 3.75 years on an after tax basis. George is currently looking at a proposal to purchase a new machine which will more fully automate the production process of several of his division's products. His division has sufficient money to invest in the machine, which will have an estimated life of 6 years and have a salvage value of $10,000 at the end of that time. Based on projections provided by the production manager of the division, the machine is expected to save the following amounts per year in labor costs, therefore adding this amount to the company's income (on a cash basis) for each year SAXOPHONE CORPORATION INFORMATION ABOUT ADDITIONAL CASH INCOME (SAVINGS) FROM CAPITAL INVESTMENT IN MACHINE Year Cash Income (Savings) S 60,000 2 50,000 3 30,000 15,000 5 10,000 5,000 The cost of the machine is S125,000. The division's (company's) estimated tax rate is 30%. The company uses straight line depreciation for all depreciable assets. Compute the following items for this machine, on an after tax basis Accounting rate of return, using the average investment as the investment base. Round your answer to four decimal places (b) REQUIRED: (1) (a) Payback period. Round your answer to two decimal places Net present value. Round your answer to the nearest whole dollar (c) (2) Should George have his division invest in the machine? Why or why not