Ikea Ltd is considering two capital expenditure projects, only one of which will be undertaken. Details of the two projects are as follows: Project Alpha Project Gama Capital cost of non-current assets $455 000 $560 000 Estimated life 4 years 4 years Residual value at end of year 4 $35 000 $40 000 Depreciation is by the straight line method. Project Alpha produces toxic waste which would be transported for disposal to a specialist company, 50 kms away. All waste for project Gama is non-toxic and disposed of locally. Project Alpha would require 10 more production staff compared to project Gama. Estimated receipts and costs (including depreciation) are as follows: Receipts: Year 1 2 3 4 Project Alpha $ 310 000 370 000 430 000 340 000 Project Gama $ 330 000 440 000 480 000 350 000 Costs (Including depreciation) Year Project Alpha Project Gama $ $ 1 245 000 280 000 2 295 000 370 000 3 325 000 380 000 4 285 000 290 000 The capital cost is payable at the start of the project life. The company's cost of capital is 12% Extract from present value table of $1 Year 1 2 3 4 12% 0.893 0.797 0.712 0.636 Page 5 of 6 Required (a) Calculate for project Alpha and project Gama: (0) The Payback Period (8 marks) () The Net Present Value (10 marks) (b) Advise the company which of the two projects they should undertake, giving reasons for your choice. (5 marks) (c) State one non financial factor which the company need to coneider before proceeding with either project. (2 marks)