Datar Ltd. purchased a $660 000 machine to manufacturer specialty parts for their 3D manufacturing process. Datar Ltd. expects to sell all it can manufacture in the next ten (10) years. The machine is expected to have a ten (10) year useful life with no salvage value. Datar Ltd uses straight-line depreciation, a 10% discount rate to evaluate capital investments. Datar Ltd tax rate is 25%, a rate that is not expected to change during the period of this investment.

Projected pre-tax cash flows:

Year	Pre-tax Cash Flow
1	$66 000
2	81 000
3	122 000
4	203 000
5	244 000
6	305 000
7	275 000
8	244 000
9	122 000
10	81 000

Required:

1. (5 marks) Calculate the unadjusted payback rate of this capital investment.

2. (15 marks) Calculate the NPV (discounted cash flow) of this capital investment

3. (5 marks) Discuss the merits of using NPV (discounted cash flow) versus unadjusted payback for capital budget decision making.