A manufacturer of car parts in Toronto regularly exports large orders to various countries in Asia. Some of the shipments are delivered by air and some by sea. In this regard, there are two different shipping costs which affect the initial investment decision. Below are the financial particulars of two competing orders for the firm. The orders are continuous over a period of time and the expected cashflows are as follows: Initial Cost order A ( by air) Order B (by sea) Year 0 -$100000 - $120000 Year 1 $50000 $40000 Year 2 $35000 $40000 Year 3 $55000 $30000 Year 4 N\A $40000 Discount rate 6.50% 7.00% The cost of transportation (which is to be added to the initial outlay) for both orders is as follows: Project/ Order Order A Order B Method of Transportation Air Sea All-in Cost of Transport $20000 $15000 Instructions: Prepare an NPV analysis of the two competing transactions, provide your analysis including any assumptions that you are employing and any drawbacks of using this method alone. Comment on the discount rate being used and how it might be arrived at (from yesterdays lecture).