A company is considering a capital investment proposal where two alternatives involving differing degrees of mechanisation, are being considered. Both investments would have a five-year life. In Option 1 new machinery would cost 278,000, and in Option 2 805,000. Anticipated scrap values after 5 years are 28,000 and 150,000 respectively. Depreciation is provided on a straight line basis. Option 1 would generate annual cash inflows of 100,000, and Option 2, 250,000. The cost of capital is 15%. Required:

Calculate for each option:

(i) the payback period

(ii) the accounting rate of return, based on average book value

(iii) the net present value

(iv) the internal rate of return.