Milan Ltd. wants to purchase a new machine for its factory operations at a cost of 380,000. This cost would be paid off in four installments: an immediate payment of 170,000, and a payment of 70,000 at the end of each of the next three years. The investment is expected to generate 80,000 in annual cash flows for a period of six years. The annual operating costs associated with the new machine are estimated to be 118,000 per year, including depreciation. These cash flows and costs will generally occur throughout the year and are recognized at the end of each year. Additional information: 1. The old machine can be sold for 25,000. 2. The new machine is expected to have the terminal disposal value 32,000 at the end of a six-year period. 3. Depreciation of the new machine is calculated using the straight-line method. 4. Major maintenance cost at the end of Year 3 will be 55,000 and at the end of Year 5 will be 30,000. 5. An additional cash investment in working capital of 20,000 will be required. It will be recovered at the end of the project. 6. Milan Ltd. will employ two highly skilled machine operators who each will earn 33,000 per year. 7. The new machine will allow Milan Ltd. to replace 7 skilled employees who each earns on average 28,000 per year. If the employees get fired, each of them is entitled to statutory redundancy pay 15% of their annual salary. There is a 70% probability that redundancy will result in strike action. If it is successful (a 60% probability), in addition to statutory redundancy pay employees will receive extra compensation equal to 20% of their annual salary. 50% of this compensation Milan Ltd. will be obliged to pay employees immediately upon redundancy, 30% - one year after redundancy whereas the remaining 20% - two years after redundancy. 8. To ensure that the new machine works at maximum efficiency, Milan Ltd. will need to lease a special energy generator at an annual lease cost of 45,000. The lease period would run for six years, with each payment being due at the beginning of the year. Required: a) Calculate the net present value (NPV) of this project assuming Milan Ltd.'s required rate of return is 8%. (27 marks)