Cuban trauma unit have just made an investment of R400 000 in a respiratory machine.

Further details:

Expected useful life 5 years (straight line depreciation)

Salvage value 120 000

Cost of Capital 10 %

Expected profit after tax data is as follows (tax rate is 30%)

YEAR NET PROFIT

1 10 000

2 40 000

3 70 000

4 125 000

5 12 000

Please help with the following:

1. Required to calculate the Payback Period?
2. Cuban trauma requires a payback period of no more than 4 years and a return of at least 30%. On the basis of these criteria, should this project be accepted?