Turrican Ltd is considering whether to purchase a new machine. It will cost $440,000 to purchase and $20,000 to install. It is expected to generate additional annual revenues of $90,000 per year for eight years, at which time it will have no further use or value. The machine will cost an additional $5,000 in electricity to run. The company's required rate of return is 7% (the present value of an annuity of eight years at 7% is 5.97). Ignore depreciation for this question. Ignore taxes for this question.

Required:

(a)What is the payback period? Show calculations. (4 marks)

(b)What is the cash flow in year zero? (2 marks)

(c)What is the annual cash flow for years 1 - 8? (2 marks)

(d)What is the NPV of this investment? (10 marks)

(e)Should the company accept this project? Why or why not? (2 marks)