Terry's Tiles Ltd is reviewing a capital investment proposal. The initial cost of the project and the net cash flows for each year are presented in the schedule below. It is estimated that there would b e no salvage value at the end of the investment's life.

Terry's uses a required rate of return of 10 percent to evaluate new capital investment proposals.
Required:
1. Calculate the project's payback period.
2. Calculate the accounting rate of return on the investment proposal. Base your calculation on the initial cost of the investment.
3. Calculate the proposal's net present value.

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Year Initial cost and carrying amount $150 000 Annual net cash flows Annual net profit $50 000 $15 000 45 000 17 000 70 000 40 000 35 000 30 000 21 000 19 000 7 000 21 000 4 23 000 3.