City Graphics Limited is evaluating a new technology for its reproduction equipment. The technology will have a three-year life and would cost Sh.800,000. Its impact on... City Graphics Limited is evaluating a new technology for its reproduction equipment. The technology will have a three-year life and would cost Sh.800,000. Its impact on the company"s cash flows is subject to risk. In the first year, management estimates that there is an equal chance that the technology will either succeed and save the company Sh.800,000 or fail saving it nothing at all. If the technology fails in the first year, savings in the last two years will be zero. Even worse, there is a 40% chance that additional Sh.240,000 may be required in the second year to convert back to the original process. If the technology succeeds in the first year, the second year cash flows may be Sh.1,440,000, Sh. 1,120,000 or Sh.800,000 with probabilities of 0.20, 0.60 or 0.20 respectively. Third year cash flows are then expected to be Sh.160,000 greater or Sh.160,000 less than cash flows in the second year, with equal chance of either occurring. All the cash flows above are after taxes. Required: a) A probability tree depicting the above cash flow possibilities. b) Net present values for each possibility using a risk-free rate of 5%. c) The expected net present value of the technology using a risk-free rate of 5%