SeyLamb Footwear is considering the purchase of a new leather stitching machine to  replace an existing machine. Assumed a required rate of return of 10% and a 50% tax rate. The company has a policy of charging depreciation on straight line method. No capital gain taxes are assumed. The following information relates to the project.
Project KuK
Project KaK
Initial Cash outlay
100,000
140,000
Salvage value
Nil
20,000
Earnings before depreciation and taxes:
Year
1
25,000
40,000
2
25,000
40,000
3
25,000
50,000
4
25,000
60,000
5
25,000
20,000
Required
For each project calculate:
(i) Pay-back Period
(ii) Internal Rate of Return
(iii)Profitability Index