Part A (19 marks) Rexon Company Limited has a five-year maximum acceptable payback period. The company is considering the purchase of a new machine and must choose between two alternatives. The first machine requires an initial investment of $14,000 and generates after-tax net cash inflows of $3,000 for each of the next seven years. The second machine requires an initial investment of $21,000 and provides an annual cash inflow after taxes of $4,000 for 20 years. You are required to: (a) Explain how you would undertake a capital investment process, e.g. the purchase of a new machine. (5 marks) (b) Explain how you would justify undertaking a capital project, e.g. the purchase of a new machine. (5 marks) (c) Determine the payback period for each machine. (4 marks) (d) Comment on the acceptability of the machines, assuming they are independent projects and the choice of machine. (3 marks) (e) Comment on the weakness of using payback as illustrated in this problem. (2 marks) Part B (6 marks) The company is considering investing in a new project. The company's cost of capital is 12 per cent and the project is expected to have an initial after tax cost of $5,000,000. Furthermore, the project is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3 and ($1,300,000) in year 4. Present value interest factors for 12% for 4 years, respectively, are as follows: 0.8929, 0.7972, 0.7118, and 0.6355. You are required to: Calculate the project's NPV and decide whether the company should make the investment. (6 marks)