1. Roberu Plc. plans to commence a new project for which special type of machinery is needed. Three different machines with different cash flows have been evaluated in relation to this machinery. Each proposed machinery would be fully used for the project but only one of the proposals can be accepted. Estimated annual cash flows under different machines are given below. Cash flows Machine 1 Machine 2 Machine 3 (Rs'000s) Year 0 -1200 -950 |-800 Year 1 -20 -110 -190 Year 2 -30 |-140 -110 Year 3 -40 -90 |-150 Year 4 -40 -60 -130 Year 5 -40 -50 -20 Residual value 20 5 0 The cash flows for Year 5 include, where applicable, the sale of the fixed assets purchased (Year 0) at residual value. The company's cost of capital is 15%. You are required to: (i) Calculate net present value (NPV) for each machine. Suggest which machine should be selected by the company and explain, (with the relevant calculations) why that machine should be selected. (10 marks) (ii) Suppose the following are the net cash inflows for the above project irrespective of the selected machine type. (Rs'000) Year 1 Year 2 Year 3 Year 4 Year 5 350 450 500 400 350 Evaluate the new project with the following calculations and comment on the results. (a) Pay Back Period (PBP) (b) Net Present Value (NPV) of the project (05 marks) (06 marks) (C) Internal Rate of Return (IRR) (07 marks) (d) Net Benefit Investment Ratio (NBIR) (06 marks) (e) State the limitations to your decision and other factors to be considered before the decision of the new project is finalized. (06 marks) (Total 40 marks)