How to calculate the PAY BACK PERIOD!

Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-died to last longer). Pappy's paid $120,000 for a marketing survey to determine the viability of the product. It is felt that Potato pet will generate sales of $725,000 per year. The fixed costs associated with this will be $187,000 per year, and variable costs wil amount to 25 percent of sales. The equipment necessary for production of the Potato pet will cost $835,000 and will be depreicated in a straight-line manner for the four years of the product life (as with all fads, it is felt that sales will end quickly). This is the only intial cost for the production.. Pappy's is in a 40% tax bracket and has a required return of 13 percent. Calculate the payback period, NPV and IRR. Use template attached.

Year 2 3 4 Sales Variable Costs Gross Profit Pro Forma Income Statement 1 725,000 181,250 543,750 187,000 208,750 148,000 59,200 88,800 Fixed Costs 725,000 181,250 543,750 187,000 208,750 148,000 59,200 88,800 725,000 181,250 543,750 187,000 208,750 148,000 59,200 88,800 725,000 181,250 543,750 187,000 208,750 148,000 59,200 88,800 Depreciation EBIT Taxes Net Income Cash Flows 297,550 297,550 297,550 297,550 Operating Cash Flow Changes in NWC Net Capital Spending Cash Flow From Assets -835,000 -835,000 297,550 297,550 297,550 297,550 Net Present Value $50,053.94 15.86% IRR