Investment Costs - The total project investment cost is 150. This is made up of Land & Buildings 120M, Construction labour 15M Machinery & Equipment 5M Vehicles 5M and Furniture and Fittings 5M. You should assume that land clearance, construction, installation of machinery and commissioning of the irrigation system takes 12 months. The machinery and equipment have a useful life of years with a replacement cost of 5M. The vehicles have useful life of 4 years and a replacement cost of 5M. You should calculate depreciation of the other assets using appropriate rates and methods of your choice. The residual value for the building is given in the tables of the project proposals under the investment Costs. You must clearly explain the methodology employed and justify any assumptions that you make. In addition to the costs and benefits on the project proposal tables, the following cost and benefits will further be acquired throughout the lifecycle of the project. Production - It is estimated that the irrigation plant will produce 500,000 units in the first year of production and will grow at 10% per year for the two subsequent years. Following this there will be no subsequent growth in production. Sales - The sales price is 200 per unit. Fixed Costs - are 6,000 for all operating years. Physical Working Capital Costs - should be based on the following assumptions: Materials - 1.5 month's supply kept in stock Final goods - 1 month's stock kept on average Working Capital - should be estimated on the following assumptions: Accounts receivable - 2.5 months credit allowed before payment due o Accounts payable - 1 month's credit given on materials purchased Using this information, you should answer the following questions to determine whether or not this project acceptable. These answers should be presented under financial analysis session. (a) Prepare an annual statement of costs and benefits (pre-financing). Interpret the results with reference to the relevant theoretical literature. (b) Calculate the Trading and Profit and Loss Account (Income Statement) for the project. Profits are taxable at 20% of annual profit and no tax holiday is available, but earlier losses can be offset against subsequent annual profits where applicable. Using appropriate ratios determine whether the level of profit is acceptable for the selected project? What additional information you would need to make a more informed and critical assessment of the profitability of the project. (c) Critically explain why UNDP should not rely on Payback Period Calculation for decision making