3. (a) RP plc. wish to expand the company's product range and have identified two possible investment opportunities (projects) as follows: Expected net cash flows in $000s are: Project Initial investment ($000) Year 0 1 2 3 A (350) 95 110 200 B (105) 45 45 45 Payback period required by RP plc. is 2.5 years. The company's cost of capital is 7 % for new investments. The discount and annuity factors at 7 % are as follows: Year 1 2 Discount factors 0.935 0.873 Annuity factors 0.935 1.808 3 0.816 2.624 Required: (i) What is the payback period for the two projects? (ii) What is the net present value for the two projects? (iii) Comment on which project should be selected assuming the projects are mutually exclusive. 2 (b) Alesi Company is considering purchasing a machine that would cost $243,600 and have a useful life of 8 years. The machine would reduce cash operating costs by $76,125 per year. The machine would have a salvage value of $60,900 at the end of the project. Required: (a.) Compute the payback period for the machine. (b.) Compute the simple rate of return for the machine