Seattle, Inc., is contemplating a project that costs $180,000. Expectations are that annual cash revenues will be $70,000 and annual expenses (excluding depreciation) will total $30,000. The project has a six-year useful life and a residual value of $30,000. Assume Seattle Inc. uses straight line method of depreciation and requires 12% minimum rate of return and a maximum payback of 3 years.

Note: PV of annuity (12% and 6 years): 4.11 and PV of $1 (12% and 6th year):0.51

Calculate the project's a) payback period b) ARR c) NPV. Show your workings. Comment on each result and make a final decision by referring to shortfalls of each method of capital investment.

(Grading: a,b,c :6 pts each, comment and decision: 21 pts)