The management of Kitchen Shop is thinking of buying a new drill press to aid in adapting parts for different machines. The press is expected to save Kitchen Shop $\$ 8,000$ per year in costs. However, Kitchen Shop has an old punch machine that isn't worth anything on the market and that will probably last indefinitely. The new press will last 12 years and will cost $\$ 41,595$. (Ignore income tax effects.)

1. Compute the payback period of the new machine 2. Compute the internal rate of return.

3. Compute the payback reciprocal and determine if it is close to the internal rate of return.

4. Interpretive Question: What uncertainties are inwolved in this decision? Discuss how they might be dealt with.

5. Interpretive Question: Explain the relationship betwcen the payback reciprocal and the internal rate of return