Marine Equipment Ltd is considering investing in one of the following projects. Each option will last 5 years and have no salvage value at the end. The company's required rate of return for all investment projects is 8%. The cash flows of the projects are provided below. Required: Cost Machinery 1 $300,000 Machinery 2 $350,000 Future Cash Flows Year 1 125,000 130,000 Year 2 130,000 135,000 Year 3 145,000 150,000 Year 4 150,000 200,000 Year 5 175,000 250,000 a) Based on the Profitability Index (PI) calculation, decide the best machinery to invest in. ANSWER a): (4 marks) For machinery 1 Present value of cash inflows = (125,000/(1+0.08)) + (130,000/((1+0.08)^2)) + (145,000/((1+0.08)^3)) + (150,000/((1+0.08)^4)) + (175,000/((1+0.08)^5)) =115740.74+ 111454.046 +110254.477 + 119102.05 + b) Would the decision in question (a) change if the company uses a simple payback period as their preferred capital budgeting technique and maintains a policy that every investment project should recover initial investment within 2.5 years? (3 marks) ANSWER b): c) Critically review and recommend the best capital budgeting technique out of the above two methods. Your answer should link with the information given in the case study and your calculation. (3 marks) ANSWER C):