1.

Superb Contractors plc is exploring the purchase of a used building, costing 1.13 million, to manufacture steel frames for decorations. The firm appointed a marketing consultant who spent the last two months examining the potential of these frames. The marketing survey costs incurred to date are 0.3 million. The consultant has advised the company will require equipment costing 13 million in order to commence operations and that this equipment can be sold for 3 million in four years time when the plant will shut down. The building is to be returned to the owner in four years' time. The accounts supervisor has prepared the * following projected profit and loss accounts for each year of the life of the project. Projected Profit and Loss Accounts (m) The accounts supervisor recommends that the company should not proceed with the acquisition of the building. Required: (a) Justify the accounts supervisor's recommendation. (b) Derive the cash flows for years 0 through 4 for this project, and calculate the project's Net Present Value. (c) State, giving reasons, whether you think the project should proceed