XYZ Corporation plans to purchase equipment costing $500,000, with an expected life of 8 years and a residual value of $20,000. The equipment is expected to generate $90,000 in annual revenues, with annual operating expenses of $20,000. The company uses straight-line depreciation and has a tax rate of 35%.

Requirements:

1. Calculate the annual depreciation expense.
2. Determine the annual after-tax cash flows.
3. Calculate the payback period.
4. Compute the NPV using a discount rate of 12%.
5. Determine the IRR.