(a) Jed Manuel Limited plans to invest 1 million in a new product range and has forecast the following financial information: Year 1 2 3 4 Sales volume(units) 85,000 90,000 100,000 75,000 Average selling price(/unit) 40 45 51 51 Average variable cost(/unit) 30 28 27 27 Incremental cash fixed costs(/year) 500,000 500,000 500,000 500,000 The above cost forecasts have been prepared on the basis of current prices and no account has been taken of inflation of 4% per year on variables costs and 3% per year on fixed costs. All prices level inflation is estimated at 2%. Working capital investment accounts for 200,000 of the proposed 1 million investment and machinery for 800,000. Jed Manuel uses a four-year evaluation period for capital investment purposes, but expects the new product range to continue to sell for several years after the end of this period. Capital investments are expected to pay back within two years on an undiscounted basis, and within three years on a discounted basis. The company pays tax on profit in the year in which liabilities arise at an annual rate of 30% and claims capital allowances on machinery on a 25% reducing balance basis. Balancing allowances or charges are claimed on the disposal of assets. The machinery has a residual value of GHc15,000 at the end of the project. The real discount rate of the company is 8%. (i) Calculate the net present value of the proposed investment. (15 marks) (ii) Calculate, to the nearest month, the payback period and the discounted payback period of the proposed investment. (4 marks) iii. Use the IRR method to evaluate the viability of the project (iv) Discuss the acceptability of the proposed investment and explain ways in which your net present value calculation could be improved.