1. Business expansion has always been a key focus of Coffee Shack management. The operations team has identified 8 new potential sites. Company has been considering proposals from different equipment suppliers. To make those sites operational, this requires significant investment. Two proposals have taken management interest. These are two proposals under consideration:

	Proposal 1	Proposal 2
Equipment cost	725,000	750,000
Economic life	5 Years	5 Years
Cash flow year 1	150,000	300,000
Year 2	50,000	200,000
Year 3	40,000	100,000
Year 4	110,000	100,000
Year 5	650,000	250,000
Total Cashflows	1,000,000	950,000

NB: cost of capital 10%

All cash flows are in

There is no residual value of equipment.

Based on above details:

• Assess and effectively apply investment appraisal techniques (Payback, NPV, ARR, IRR etc) to advise management on above proposals outlining merits of each technique. (25 marks)