You have recently joined the finance team at Rockham Plc a manufacturer of components for the motor industry. On the first day, you heard a few colleagues talking about a potential investment of a new machine and the importance of budgeting as a successful tool within the overarching strategic planning process. As these areas are of particular interest you request to be part of the project team that assesses the viability of the investment. You are provided with the following details:

The purchase cost of the new machine is 40,000,000. The machine will produce an expected annual cash inflow of 17,000,000, with an annual cash outflow of 6,400,000. It is expected the machine will have a useful life of 5 years after which it can be sold for 5,000,000. The machine will be depreciated using the straight-line method. Rockham Plc currently has a cost of capital of 7%

Calculate the Payback Period, the Accounting Rate of Return, and the Net Present Value of the machine, and provide recommendations as to whether Rockham Plc should buy the machine.