Brian Ltd is considering investing N$350 000 in a new machine. Two alternatives, A and B, are being considered. Both machines would have a useful life of five years, at the end of which the residual value of A would be N$50 000, and that of B N$70 000. The accounting profits (after charging straight-line depreciation) for each machine are estimated to be:

The company has an annual cost of capital of 8%. Discount factors for 8% : \begin{tabular}{|c|c|c|c|} \hline \multirow{2}{*}{\multicolumn{2}{|c|}{ Requirement }} & \multicolumn{2}{|c|}{ Mark } \\ \hline & & \multirow{2}{*}{Sub-total14} & \multirow{2}{*}{Total14} \\ \hline 4.1 & Evaluate each machine using NPV & & \\ \hline 4.2 & Evaluate each machine using Payback period & 4 & 18 \\ \hline 4.3 & Advise Brian Ltd (giving reasons) as to which machine to purchase. & 4 & 22 \\ \hline 4.4 & AfurthermethodofevaluationistheInternalRateofReturn.StatebrieflyhowtheInternalRateofReturniscalculatedanditssignificance(youarenotrequiredtocalculatetheInternalRateofReturn) & 3 & 25 \\ \hline 4.5 & Explainhowsensitivityanalysiscanhelptorefinecapitalinvestmentdecisions & 3 & 28 \\ \hline \end{tabular}