Pool plc is currently planning to buy a new machine which will cost $165,000.$ It is expected

to generate new cash sales of $175,000$ per year. The machine will be used for $5$ years and at

the end of this period it will be scrapped and not replaced. The scrap value of the machine is

expected to be $20,000.$ Initial investment in working capital of $15,000$ will also be needed.

Annual material and operating costs are estimated to be $105,000$ per year.

Pool plc uses a discount rate of $10\%$ in the investment appraisal process. The company has a

target Return on Capital Employed $($ROCE$)$ of $30\%$ per year, a minimum acceptable PI ratio

of $1\mathrm{.}6$ and a maximum payback period of $2\mathrm{.}5$ years. Ignore taxation. $($CLO $1,$ CLO $5,$ CLO $6)$

Required:

$(1)$ Payback period; $(5$ marks$)$

$(2)$ Return on Capital Employed $($accounting rate of return$)$; $(10$ marks$)$

$(3)$ Net Present Value $(10$ marks$)$

$(4)$ IRR $($use $10\%$ and $20\%)(10$ marks$)$