Pedric Ltd is looking to expand Its operations and increase its market share in the canned food industry. To achieve this it is looking to increase its current productive capacity of 1000 000 cans a year by at least 5% for each of the next 5 years. It is considering canning machines and IS unsure which to purchase. Machine A can be imported ata landed purchase cost of R380 000 and a further Rao ODO transport and installation costs Will have to be incurred to get it ready for production. This machine is expected to last 5 years after which time it can be sold for 5% of its landed purchase cost _ Net cash revenue from the sale of the additional production is expected to be R140 000 in the first year and this is expected to increase b'/ 8% every year over the life tme of the machine. This machine Will enable Pedric to achieve a 3% increase in productive capacity. Machine a can be purchased locally for R300 000 and will also have a useful life of 5 years. It will not have any resale value at the end of the 5 years and be disposed of. Net cash inflows from additional production will amount to R140 000 per annum for each of the five years. This machine will enable Pedric to achieve a 2% Increase in productive capacity. Pedric Ltd requires a return on capital of 12% for all investments made. The depreciation policy is to depreciate all noncurrent assets on a straight line basis. Assume that all cash flows occur at the end of each financial year except for the initial investment which occurs in period D It has already been determined that the internal rate of return is 28.73% for Machine A and 367% for machine 8_ The capital expenditure committee has Indicated that R700 000 is available for this capital expenditure. In terms of the company's capital expenditure policy, onty projects with a payback period of less than three years are accepted REQUIRED: You are the financial manager at Pedric Ltd and have been asked by the Board of Directors to advise then* on which machine's to authorise for purchase. I using appropriate capital budgeting techniques compile a report to the Board of Directors detailing the option that should be chosen.