Question 5 (12 marks) The parts a) and b) below are independent questions which do not relate to each other. a) The parts i), ii) and iii) are based on the information provided below: A company is considering investing in Project X. The project requires an initial investment of $890,000 and is expected to generate the following cash flows at the end of each year. The cost of capital for the company is 10% p.a.

Year 1 2 3 4 5 6 7 8 Cashflow $152,000 $152,000 $152,000 $152,000 $152,000 $152,000 $152,000 $263,000

i) Calculate the net present value (NPV) for Project X. Round your answer to the nearest dollar. Provide your advice with your reason to the company considering the NPV. (3 marks)

ii) Calculate the payback period in years for Project X. Round your answers to 2 decimal places.