A company is considering a new investment project. The estimated cash flows for the project are as follows:

Initial investment cost (year 0) 15,000

Net annual cash inflows:

Year 1 5,000

Year 2 7,000

Year 3 8,000

Cash inflow from residual value (year 3) 2,000

Required: (a) Calculate the payback period for the project. (3 marks)

(b) Calculate the net present value for the project, assuming a cost of capital of 8%. (3 marks)