The Heather Forde Corporation, a firm in the 35% marginal tax bracket with a 15% required rate of return, is considering a new project. This project involves the introduction of a new product. This project is expected to last five years and then, because this is somewhat of a fad project, it will be terminated. The following information pertains to the project:

Cost of new plant and equipment	$6,900,000
Installation costs	100,000
Unit sales
Year	Units sold
1	80,000
2	80,000
3	80,000
4	120,000
5	120,000
Sales price	$250 per unit
Variable cost	$130 per unit
Annual fixed costs	$300,000
Working capital	$500,000
Depreciation per year	$1,200,000

The working capital that is required at the beginning of the project will be recovered at the end of the project. The plant will be sold at the end of the project for $1,000,000.

Required:

1. Determine the net cash flows associated with the project [7 marks]
2. The project's net present value [8 marks]
3. The payback period for the project. [5 marks]
4. Briefly compare the NPV with the Payback as decision making techniques. [5 marks]