Camio Ltd wants to expand its activities both locally and abroad. The management wants to purchase an additional machine and has a choice between Bite and Mega. Information for the two machines is provided below: Details Bite $ 60 000 12 500 17 500 15 000 20 000 15 000 Question 3 a) b) Cost of machine Estimated net cash inflows: Year 1 1234 For each machine calculate: i) ii) 2 4 Residual value Depreciation is charged on both machines using the straight-line method. Camio Ltd's cost of capital is 12% and the extracts from Present Value Tables of $1 are: Year 3 Discount factors at 12% 0.893 0.797 0.712 Mega $ Payback period; Accounting rate of return using average investment; 75 000 25 000 35 000 15 000 15 000 15 000 4 0.636 iii) Net present value. [18] Write a report to Camio Ltd advising management on which machine to purchase. Explain the reasons for your recommendations. [11]