Yevana runs a manufacturing business and is considering investing in a new machine to increase its capacity in order to manufacture a new product. The machine would cost 800 000 with a residual value of 60 000 after its expected useful life of five years.

The forecast net operating cash inflows for the product are as follows:

Year	(000)
1	275
2	395
3	585
4	425
5	345

The new machine will require additional installation costs of 80 000.

The cost of capital of the business is 12% per annum.

The following discount table is provided.

Periods	8%	10%	12%	15%	18%
1	0.926	0.909	0.893	0.870	0.847
2	0.857	0.826	0.797	0.756	0.718
3	0.794	0.751	0.712	0.658	0.609
4	0.735	0.683	0.636	0.572	0.516
5	0.681	0.621	0.567	0.497	0.437

Required:

(a) Calculate

(i) cashflow to use used in (ii)-(iv) (1 mark)

(ii) payback period (2 marks)

(iii) Accounting Rate of Return (3 marks)

(iv) Net Present Value (5 marks)

(v) Internal Rate of Return (7 marks)

(b) Comment based on your result the viability of the investment.