Determine the investment's net present value, the internal rate of return, payback period and the discounted payback period. All key assumptions should be specified and explained and an interpretation provided of results for each of the investment criteria specified. You should identify and explain the costs and benefits that you think should be included in a rational decision making process. On the basis of your analysis above, make a suitable recommendation for the company's top management explaining the rationale behind it. (HINT : a good answer should clearly explain each figure used in the analysis - used or not). (12 marks) Assess how sensitive the calculated NPV is to three inputs employed in the analysis. Provide an interpretation of your results and comment on how valuable you think this analysis may be in taking a decision on the investment. Apart from the sensitivity analysis, use another one method (choose from scenario analysis, Monte Carlo simulation, BEP analysis) to assess your capital budgeting analysis and findings. Compare the methods used in reference to their risk probability. (4 marks) Assume that the annual rate of inflation is expected to be 4 per cent per annum for the next five years. Also assume that the required rate of return of 14 per cent you employed above is a market determined rate and incorporates an allowance for the expected rate of inflation of 4 per cent Explain how you would take the expected rate of inflation into account in a revised analysis. (Part (a) of the question should be completed on the basis that the expected rate of inflation is zero.) Rework the NPV analysis of part a) under the revised rate and comment on your findings