Orange Company is considering the purchase of some equipment. The initial investment will be $42,000. The estimated useful life of the equipment will be 5 years, at which point it will have a zero salvage value.

The annual savings in cash operating costs will equal $12,500, and the company has a minimum required rate of return of 12 percent. Use straight-line depreciation, and ignore income taxes.

Compute (Show all calculations):

1. Net present value
2. Internal rate of return
3. Payback period
4. Accounting rate of return using initial investment
5. Should Orange purchase the equipment? Explain why or why not