SIFT company is contemplating the purchase of a large piece of machinery for $80000. SIFT anticipates that the machine will have a six year life; have annual cash inflows of $20000 and a salvage value (at end year six) 0f $10000. SIFT assigns a cost of capital or minimum rate of return of12% for the project. Ignore income taxes.

**a) **What is the payback period?

**b) **What is the internal rate of return? (note: for part [b] ONLY, ignore salvage value)

**c) **What is the net present value? A table is provided below:

YEARS EVENT AMOUNT PV FACTOR PRESENT VALUE

_______________NET PRESENT VALUE________________

**d)** What is the present value index?

**e)** Based on your answers to [c] ands [d], should SIFT buy the machinery? Why or why not?