Your company is considering investing in a project which entails buying a new machine. The machine is estimated to cost $$1400000$ and will have an estimated useful life of five years. The scrap value at the end of five years has been estimated to be $$200000.$ The following is the estimated net cash flow for the next five years:

Year Cash flow

$1300000$

$2400000$

$3500000$

$4600000$

$5400000$

Your company$$s target rate of return for such projects is $20\%$ with a target payback period of less than four years. Depreciation is calculated using the straight$-$line method and the companies cost of capital is $15\%.$

$5\mathrm{.}1$ Calculate each of the following on behalf of the company:

$5\mathrm{.}1\mathrm{.}1$ Payback period $($PBP$)(3)$

$5\mathrm{.}1\mathrm{.}2$ Net present value $($NPV$)(5)$

$5\mathrm{.}1\mathrm{.}3$ Accounting rate of return $($ARR$)(5)$

$5\mathrm{.}2$ Based on the outcome of the above calculations, advise your finance team whether they should go ahead with the project. Motivate your advice.