Gallatin, Inc., has assembled the estimates shown below relating to a proposed new investment with a 5-year life. If the investment is undertaken, new equipment must be purchased and existing old equipment will be sold immediately. The new equipment will have no salvage value at the end of the 5 year project.

Annual cash sales	$	450,000
Annual out-of-pocket cash expenses	$	340,000
Annual depreciation on new equipment	$	60,000
Initial cost of new equipment	$	400,000
Sale of old equipment	$	25,000

**For NPV and IRR, use tables in APP 12-B rather than results from a financial calculator to demonstrate your understanding of cash flows and table factors.

1) Compute the payback period for the investment

2) Compute the investments approximate IRR

3) Compute the investments simple rate of return