Chaotic Industries is considering an investment in a fleet of 10 delivery vehicles to take its products to customers. The vehicles will cost K30,000 each to buy, payable immediately. The vehicles are expected to operate successfully for six years, at the end of which period they will all have to be scrapped, with no disposal value. At present, the business uses a commercial carrier for all of its deliveries. But this carrier service will be terminated once the vehicle investment is implemented. The annual cost savings are expected to total K60,000 because of this investment.

Required:

a. What is the payback period for this investment?

b. Assuming a 15% discount rate (cost of capital), what is the Net Present Value?