Nchanga Demolishers Limited intends to purchase a new demolishing machine. The following information is available:

• Cost of machine: K120,000,000
• Expected useful life: 6 years
• Scrap value: K80,000,000
• Method of depreciation: Straight line
• Cost of Capital: 14%

Yearly Cash Flows and Profits:

Year	Cash Flow	Profit
1	20,000,000	2,000,000
2	24,000,000	6,000,000
3	56,000,000	38,000,000
4	40,000,000	22,000,000
5	60,000,000	42,000,000

Requirements:

a) What are relevant costs in investment appraisal decision-making? b) Contrast the payback period and accounting rate of return (ARR). c) Using the information above, calculate the following:

• i) Payback period for the new machine in months.
• ii) Net present value (NPV) for the new machine and advise if Nchanga Demolishers Limited should invest in this machine.