The large publishing company you work for has built up an excess pile of $200M cash due to better than expected sales and delays in making any new investments in production facilities. As the newly promoted Chief Financial Officer, the CEO has instructed you to find uses of this unneeded cash that will earn the highest return for shareholders; liquidity (ease of convertibility into cash) is not an issue. You may also invest any amount of cash (from $200M to any remaining after investments) into a stock market index expected to earn 6% per year or distribute to shareholders as a dividend. Please note that your cost of capital to consider for the project(s) you choose is 9%.Write to the CEO in a one page summary explaining why the options (not exceeding $200M in cash required) you have chosen are the best.

Much of the companys publishing equipment has become worn down and outdated, and investing in

new equipment would result in lower costs and quicker delivery times for special orders. You can sell

the old equipment today for an after-tax cash inflow of $35M and invest $120M in new equipment that

will generate the following cost savings and extra revenue:

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Sales $5M $5M $10M $10M $15M $15M

Costs Savings $10M $10M $10M $10M $5M $5M

Question: Compute the Payback Period, Net Present Value and Internal Rate of Return. Explain your reasoning.