1. Bedford Onions is examining the possibility of purchasing a machine for a new venture. The machine will cost 50,000, have a four-year life and a scrap value of 10,000. An additional investment of 15,000 in working capital will be needed at the outset. This is recoverable at the end of the project. The accountant's figures for the annual trading accounts are as follows: Sales Labour Materials Direct overhead Allocated overhead Depreciation Annual profit 100,000 (20,000) (10,000) (20,000) (15,000) (10,000) 125,000 Allocated overhead costs consists of central administrative costs which re incurred with or without the project. The machine will be eligible for a 25 per cent writing-down allowance (on a declining balance). Tax is payable at 30 per cent in the year of profit creation. For a project of this risk class a minimum return of 14 per cent is considered acceptable. Assume no inflation. (a) Calculate the net present value of this investment. (90 Marks) (b) Explain briefly how inflation is handled in incremental cash flow analysis. (10 Marks)