Benson manufactures high-quality headphones for music lovers of all styles. The company requires a payback period of less than five years for any capital budgeting decisions.

Required rate of return: 8%

Income tax rate: 35%

Depreciation method: straight-line

CCA rate declining balance for income tax purposes: 30%

All CF occur at end year except for the initial investment

Today 1 2 3 4

Initial investment (126,000)

Annual cash flows from operations

(excluding depreciation) 38,000 38,000 38,000 38,000

Cash flow from sales of machine 0

Does the project meet the requirements (Hint: calculate the payback period of the investment. Show your steps and the formula you used to calculate the payback period.)

Calculate the NPV of the investment (Clearly show your steps.)