Knutsford Express Company Ltd. is considering expanding its fleet of buses. The company must choose between a gas-powered and an electric-powered buses for transporting passengers. Since both buses perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric- powered bus will cost more, however it will be less expensive to operate; it will cost $22,000, whereas the gas- powered bus will cost $17,500. The cost of capital that applies to both investments is 12 percent. The life for each type of bus is estimated to be 6 years, during which time the net cash flows for the electric-powered bus will be $6,290 per year and those for the gas-powered bus will be $5,000 per year. Annual net cash flows include depreciation expenses. a. Calculate the NPV for each bus and decide which to recommend, show working. (12 marks) b. State two advantages and two disadvantages of the using NPV. (4 marks) c. Though the payback method for evaluating capital investments has some serious flaws, it is popular in business practice, showing up on most financial evaluation software packages. Outline three reasons why the payback method is popular in business? (3 marks) d. What decision criterion would you recommend for Mutually Exclusive Projects. (2 marks) e. Why would a manager not accept a project that has a positive net present value?. (4 marks)