Hightex Ltd is currently considering whether it should invest in Project Y. The following data have been collected in connection with the project: Project Y An initial investment of 120 million will be required on 1 January 2009. The project has a three year life with a nil residual value. Depreciation is to be calculated on a straight line basis The revenues and costs expected as a result of proceeding with Project Y are as follows 2. Year Revenue Cost 2009 2010 2011 110 million 70 million 95 million 45 million 35 million 48 million Assume that all cash flows other than the initial investment take place at the end of each year. Ignore taxation in your calculations. A discount factor of 8% is to be used to evaluate Project Y Requirement (a) Calculate the accounting rate of return (ARR), payback and net present value (NPV) for Project Y 18 marks (b) Should Hightex Ltd invest in Project Y? State clearly your reasons 3 marks (c) Outline the advantages and disadvantages of each of the methods calculated in part (a) and suggest other factors that should be taken into account before making a final decision marks Total 30 Marks