Q6 /a) A project requires the purchase of a new piece of machinery. You are the project manager and you must choose between two potential machines (Machine A and Machine B), either of which would be suitable. The cost of each machine is identical at $200,000. However, they differ in performance such that the projected future cash flows are different for each machine. Projected cash flows over a 5 year period are as shown in Table 26-1 Table 26-1 Five year cash flow figures for Machine A and Machine B Year Cash Flow: Machine A Cash Flow: Machine B 0 -200,000 -200,000 1 140,000 60,000 2 70,000 75,000 3 50,000 90,000 4 25,000 150,000 5 20,000 220,000 4 marks (i) Show which machine would be the preferred choice based on a Payback Period estimate 4 marks (ii) For each machine calculate Return on Investment 4 marks (iii) For each machine, calculate the Net Present Value (NPV) after 5 years assuming a discount (inflation) rate of 2% for each year of the project. Table 06-2 provides a list of discount factors for a range of discount (inflation rates Table Q6-2. Discount Foctors for given discount (inflation) rates over 5-year period Discount Factors for given discount (inflation) rates over a 5-year period Years 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 1 1 0.9901 0.9804 0.9709 0.9815 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 2 0.9803 0.9612 0.9426 0.9246 0.0070 0.8900 0.8734 0.8573 0.8417 0.8264 3 0.970G 0.9423 0.9151 0.0890 0.8638 0.0396 0.8163 0.7938 0.7722 0.7513 4 0.9810 0.9238 0.8888 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 5 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.8209 (b) Compare three financial project selection models mentioned above discussing the advantages and disadvantages of each 4 marks