Question 1 (44 marks) $ Hollings Company, a furniture manufacturer, is considering investing in some new production machinery. The details of this investment are: Amount of Investment $ 300,000 Annual cash flow revenue $ 84,000 Annual cash flow expenses $ 58,000 Life of the project (in years) 10 Scrap value of equipment at the end of the project $ 18,000 Hollings Company's corprate tax rate 31.00% Hollings Company's weighted average cost of capital 11.50% CCA rate on the new equipment 25.00% Required 1) Calculate the net present value of this project. 2) Calculate the profitability index. 3) Should Hollings proceed with the new project? Question 2 (26 marks) A&B Enterprises is trying to select the best investment from two alternatives. Cash flows for each alternative are: Initial outlay $ 93,000 $ 93,000 Year 1 2 3 4 5 Investment A Investment B $7,000 $63,000 $25,000 $47,000 $33,000 $40,000 $72,000 0 $69,000 0 For each of the investments, calculate the following use a 10% discount rate): (a) Payback period (b) Internal rate of return (c) For each method individually, which is the better investment