A manufacturing company is evaluating a new production line with the following projected costs and revenues:

Initial Investment:

• Machinery: $800,000
• Installation: $200,000

Annual Revenues and Costs:

• Year 1 Revenue: $400,000
• Year 1 Costs: $100,000
• Year 2 Revenue: $450,000
• Year 2 Costs: $110,000
• Year 3 Revenue: $500,000
• Year 3 Costs: $120,000
• Year 4 Revenue: $550,000
• Year 4 Costs: $130,000
• Year 5 Revenue: $600,000
• Year 5 Costs: $140,000

Requirements:

1. Compute the payback period.
2. Calculate the net present value (NPV) assuming a discount rate of 12%.
3. Determine the profitability index (PI).
4. Assess the internal rate of return (IRR).