Calculation of Payback period, NPV and PI of project

Julia Corp. is in the business of making sugar cookies. The company is considering the purchase of a new cookie making machine which will improve its manufacturing process and result in significant cost savings. The equipment costs $250,000 and the resulting financial impact is an after-tax cash flow savings of $60,000 in yr. 1 with this savings increasing by $10,000 annually with the 5th year resulting in after-tax cash flow savings of $100,000. At the end of the 5th year the machine will be sold for $10,000. Assume that the prevailing market rate of interest is 13%.

(a) What is the payback period for the proposed investment?

(b) Assume that sale of the equipment at the end of five years would net the firm 200,000, rather than $10,000. Now what is the payback period for the proposed investment?

(c) Assume the required return changes to 15%. What is the project's discounted payback period? Assume that the machine can be sold for 10,000 at the end of the 5th year.

(d) Assume the required return is 15%. What is the project's net present value? Assume that the machine can be sold for 10,000 at the end of the 5th year.

(e) Assuming a required return is 15%, what is the project's profitability index?