Gormorate Finance Question Investment Appraisal=voviders ELG Question Mark Webber is the Financial Manager of Joyriders plo. He is nearing retirement, You have been appointed as hils deputy with a view to taking over from hilm in twelve months' time. The company is considering an Investment in a new product which will cost $1,200,000 in new machinery and will result in pre-tax cash flows of $375,000 per annum in real terms for five years. At the end of the five years, the machinery can be sold for its written down book value of $284,800. The investment will require working capittil at the beginning of each year as follows (figures in real terms): YearAmount($)1100,0002200,0003300,0004400,0005500,000 Mark is proposing to evaluate the investment using the company's (nominal) cost of capital of 16%. The following notes are relevant: 1 At the end of year 5 , the total working capital can be released in cash back to the company. 2 Inflation is expected to be 4% per annum on all operating cash flows and working capital for the period under review. 3 The company pays tax at the rate of 33%. There is a twelve-month time lag for corporation tax. 4 Tax relief is available on capital expenditure at 25% on a reducing balance. The company also depreciates its plant and equipment on this basis. 5 Assume all cash flows occur at the end of the year except the purchase of fixed assets (that is, the new machinery) and working capital. Both these ittems of expenditure occur at the beginning of the year. Required; Evaluate the investment using the company's cost of capital. (15 marks)