The following information relates to three possible capital expenditure projects. Because of capital rationing, only one project can be accepted:

	Project
	P	Q	R
Initial cost	250,000	210,000	190,000
Expected life (years)	5	4	5
Scrap value expected	20,000	17,500	12,000
Expected cash inflows
End of year 1	75,000	90,000	60,000
2	70,000	70,000	65,000
3	65,000	55,000	70,000
4	60,000	80,000	75,000
5	55,000		80000

The company estimates its cost of capital is 14 per cent.

Required: Calculate

1. The payback period for each project.
2. The accounting rate of return for each project.
3. The net present value of each project.
4. Which project should be accepted - give reasons.
5. Explain the factors management would need to consider, in addition to the financial factors, before making a final decision on a project.