The equipment will cost SDI): is expected to have a working life of 4 years: and will be depreciated on a diminishingvalue basis to a book value of zero. The equipment is expected to have a salvage value of 81213 at the end of 4 years. The new equipment will improve efficiency and result in increased revenue of 385D in its first year of operation, but because of reduced efficiency from normal wear and tear: revenue will decrease by 4% { from the previous year's revenue) for each of the remaining 3 years of the equipments life. Excluding maintenance: all other costs from operating the equipment will be 82812} per year. Maintenance costs will amotmt to 5120 in the equipment's first year of operation and will then increase by 830 per year for the remaining 3 years of the equipment's life. The equipment will require additional networking capital of 3200. The net working capital will be recovered in ill after the equipment is sold at the end of its working life. The equipment will be installed in a building that is owned by the company but currently is not being used. If the project does not proceed: this building could be rented out for 52130 per year. A feasibility study has been undertaken on the purchase of the new equipment. The cost of preparing the feasibility study was S4011]. The company has sufficient capital to undertake all positiv'e-'.*~lTl'v'r projects. If the Payback Period method is used to evaluate projects= management's policy is that the maximum acceptable payback period is 3 years: and all cash ows in Year 0 would need to be recovered within 3 years for die project to be acceptable tmder this method