The owner of the company you work for has presented you with data about a potential investment.

Machine

Original outlay (beginning of Year 1):$350 000

discount value are (7%):

1. .935
2. 0.873
3. .816
4. .762

Expected net cash inflow:

Year

Amount

1 $45 000

2 $45 000

3 $55 000

4$50 000

Salvage value (expected in year 4)

$105 000

The owner of the company estimates the cost of capital to be 7%.The company has enough funds to meet all capital expenditure requirements.

b.Calculate thepayback periodfor the investment.If the owner expects all investments to be 'paid back' in 3 years, should this machinery be purchased?Please explain your answer.