A company is planning to expand its production capacity. The details are as follows:

• Initial investment: £600,000
• Projected cash flows over the next five years:
  • Year 1: £150,000
  • Year 2: £160,000
  • Year 3: £170,000
  • Year 4: £180,000
  • Year 5: £190,000
• Depreciation: 20% on Written Down Value basis
• Cost of capital: 9%
• Scrap value at the end of five years: £60,000
• Corporate tax rate: 25%

Required:

1. Calculate the NPV of the project.
2. Compute the profitability index.
3. Determine the payback period.
4. Calculate the average accounting rate of return (ARR).
5. Provide an analysis of whether the expansion should be undertaken.