A company is evaluating an investment project requiring an outlay of 1.4million on new machines (Year 0). The machines would be expected to have a useful working life of six years, with a residual value of 80.000 (Year 6), and would be depreciated on a straight line basis. Estimates of cost savings (net of depreciation of the new machines) arising from the investment are Year '000 1 20 2 50 3 to 6 80 per annum REQUIRED (a) Calculate in relation to the investment project the: 0 average annual accounting rate of return; (5 marks) (0) payback period, (6 marks) () discounted cash flow internal rate of return Discount factors Year 5% 10% 15% 1 0.952 0.909 0.870 2 0.907 0.826 0.756 3 0.864 0.751 0.658 4 0.823 0.683 0.572 5 0.784 0.621 0.497 6 0.746 0.564 0.432 (6 marks) (b) State whether the investment project is financially worthwhile if the company's cost of capital is 8% per annum. Explain your reasoning (3 marks) (Total 20 marks)