4. Capital Budgeting: Net present value and internal rate of return. Divine plc is a pure-honey producing plant. The firm wants to replace its aging processing machine. One option is to purchase a similar machine for $250,000. However, the output may not be able to meet the growing demand, therefore the revenue will be relatively stable. A second option is to invest in a more efficient equipment that cost $350,000. The revenue from this option is expected to be greater than the first option due to increased demand but the revenue varies. Both equipment have useful lives of 10 years and the cost of capital in investing in these equipment is 10%. The cash flows from the investments are contained in the table below. Project A $250,000 Project B $350,000 Initial investment Year Cash Inflow 45100 45100 45100 45100 45100 45100 45100 45100 45100 45100 72500 65500 73800 71500 69800 75500 31000 47500 55500 29200 10 NPV IRR a. Determine the net present value (NPV) and Internal rate of return (IRR) of both investments and identify the more preferred project under each of the project evaluation methods. Note: There is a conflict between NPV and IRR in the project decision b. Now that the NPV and IRR do not reach a consensus on a particular project, explain the likely cause of the conflict. Given the conflict in b, what will be your recommendation and why? If both NPV and IRR are used to evaluate projects, what unanimous decision should the two methods reach? C