A company is considering an investment in new equipment. The company has a cost of capital of 12% per annum.

Required:

Calculate:

(i) The net present value (NPV); (10 marks)

(ii) The internal rate of return (IRR); (4 marks)

(iii) The discounted payback period, (4 marks)

of the investment project, using the following information as appropriate:

Year Cash flow Discount Discount

($000) Factor (12%) Factor (20%)

0 (460) 1000 1000

1 160 0893 0833

2 150 0797 0694

3 190 0712 0579

4 250 0636 0482

5 160 0567 0402

6 (40) 0507 0335