Question #1 (44 marks) A small business wants to invest in a new machine to maximize its productive capacity of sugar wax. The purchase price of the new machine is $337,500 which will have an economic life of five years. There is installation and commissioning cost of $23,500 and $14,000 respectively. It is estimated that a market exists for 42,500 bottles of sugar wax locally per annum. Each bottle of sugar wax will be sold for $80 and will cost $45 to produce. A previous market research has indicated that the small business could gain 14% of the market in the first three and 10% in the final two years. Other relevant information are as follows: years . Variable distribution cost of $4 each Annual promotion cost of 2% of sales revenue Depreciate the machine using the straight-line method. There is a scrap value of $5,000. The required rate of return on debt is 20% (stated net) and return on equity is 14% Currently the assets of the company are funded by 70% debt and 30% equity Corporation tax rate is 30%. *** Depreciation is an allowable deduction for tax purposes. Required: (a) The annual operating income after tax and the operating cash flows of the project and the net present value (NPV). (b) Internal Rate of Return and Profitability index of the project. (29 marks) (7 marks) (c) A Recommendation to the management team to accept or reject the project. (2 marks) (d) Discuss three (3) factors that the entity can consider when implementing this project? (6 marks)