The management of Sonate Company, a wholesale distributor of fashion products, is considering the purchase of a $72,000 machine that would reduce operating costs in its warehouse by $16,000 per year. At the end of the machines 5-year useful life, it will have no scrap value. The companys required rate of return is 5%.

Required: (Ignore income taxes.)

1. Determine the net present value of the investment in the machine.

2. What is the payback period for the investment? ____ years