2. The KK Business' second capital asset investment project will require an initial investment of $624,000 and is expected to generate the following cash flows:

Year 1 $175,000

Year 2 $155,000

Year 3 $165,000

Year 4 $145,000

Year 5 $345,000

A. What is the project's payback period?

B. If the required rate of return is 14%, what is the project's net present value? The present value of $1 at compound interest of 14% for 1, 2, 3, 4 and 5 years is .877, .769, 675, .592 and 519, respectively. Note, the second capital asset will be sold at the end of year 5, cash proceeds of $240,000 are included in the year 5 cash flow.

C. Which Project would you accept and why?