a) Provide a critique of three financial project selection models of your choice by discussing the advantages and disadvantages of each. b) A project requires the purchase of a new piece of machinery. You are the project manager and you must choose between two potential machines (Machine A and Machine B), either of which would be suitable. The cost of each machine is identical at 311,000. However, they differ in performance such that the projected future cash flows are different for each machine. Projected cash flows over a 5 year period are as shown in Table Q2a 0 2 4 5 Year Cash Flow: Machine A Cash Flow: Machine B -311,000 -311,000 1 10,000 200,000 70,000 111,000 3 100,000 55,000 131,000 40,000 250,000 32,000 Five year cash flow figures for Machine A and Machine B. Show which machine would be the preferred choice based on a Payback Period estimate. For each machine calculate Return on Investment. For each machine, calculate the Net Present Value (NPV) after 5 years assuming a discount (inflation) rate of 1% for each year of the project. Table Q2b provides a list of discount factors for a range of discount (inflation) rates. For each machine, calculate the Internal rate of return after 5 years assuming a discount (inflation) rate of 1% for each year of the project. i. ii. iv. v. The project manager decides to purchase Machine A. Suggest why. Discount Factors for given discount (inflation) rates over a 5-year period Years 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 N 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 3 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 5 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 Discount Factors for given discount (inflation) rates over a 5-year period