Lunar Manufacturing is considering purchasing a new machine that costs GBP 500,000. The machine is expected to generate the following cash flows over its 5-year life:

• Year 1: GBP 120,000
• Year 2: GBP 130,000
• Year 3: GBP 140,000
• Year 4: GBP 150,000
• Year 5: GBP 160,000

Requirements:

1. Calculate the payback period.
2. Determine the NPV using a discount rate of 6%.
3. Compute the IRR.
4. Calculate the ARR.
5. Should Lunar Manufacturing invest in the new machine? Provide a detailed explanation based on your calculations.