Capital Investment decisions are very important due to the long-term nature of most projects and the amount of money involved with these large expenditures. You have been asked by your manager to calculate and comment on the following potential capital investment.

Year	Net Profit (after depreciation)
1	20000
2	30000
3	40000
4	5000
5	5000

The initial investment will cost 100,000 and the project will last 5 years and have a residual value of 10,000. The company will apply depreciation on a straight-line basis and the estimated cost of capital is 8%.

Year/%	6%	7%	8%	9%
1	0.9434	0.9346	0.9259	0.9174
2	0.8900	0.8734	0.8573	0.8417
3	0.8396	0.8163	0.7938	0.7722
4	0.7921	0.7629	0.7350	0.7084
5	0.7473	0.7130	0.6806	0.6499
6	0.7050	0.6663	0.6302	0.5963
7	0.6651	0.6227	0.5835	0.5470

Required:

(a) Calculate the following from the information above

1. Payback period

2. Accounting Rate of Return (ARR)

3. Net Present Value (NPV)

4. Discounted Payback period

(b) Explain the Internal Rate of Return (IRR)?

(c) Briefly comment on the advantages and disadvantages of the methods in part (a), this may include a discussion of both financial and non-financial factors and recommend which method you would pay most attention to, and why.