XYZ Manufacturing plans to invest in a new equipment costing GBP 300,000. The following information is given:

• Expected useful life: 8 years
• Scrap value: GBP 50,000
• Depreciation method: Reducing balance
• Cost of Capital: 12%

Yearly Cash Flows:

Year	Cash Flow
1	80,000
2	70,000
3	60,000
4	50,000
5	40,000
6	30,000
7	20,000
8	10,000

Requirements:

1. Calculate the payback period.
2. Compute the NPV of the equipment.
3. Determine the accounting rate of return (ARR).
4. Evaluate the profitability index (PI).
5. Make a recommendation based on your calculations.