A.Heavenly Inc. is contemplating the purchase of a machine that will provide it with net cash flows of $100,000 per year for 8 years. Interest is 10%. Assume the net cash flows occur at the end of each year. What is the present value of the net cash flows? [Round off all PV or FV factors you use to three decimal places]. (4 points)

B.Starry Inc. has four potential projects to consider for investment in the next financial period.The following table summarises an appraisal of the projects using different analysis tools:

Project

Payback (Years)

NPV(10%)

A

4

-$610

B

3.5

+$2,430

C

3.8

+$3,610

D

4.2

+$4,790

TASK

(a)Why was the payback techniques inadequate on its own to assess the four projects? (2 points)

(b)Explain clearly what the +$2,430 Net Present Value (NPV) for project B means. (3 points)

(c)Both payback period and net present value techniques employ cash flows forecast in their analyses. Why do you think that cash flow forecasts are used rather than profit forecasts to assess the viability of the proposed projects? Explain your answer. (3 points)

(d)Explain two non-financial factors of Heavenly need to consider before deciding to approve an investment with a positive NPV? (4 points)