QUESTION 1 PART 1 CLO4 10 Marks QUESTION 1 PART 2 CLO4 3 Marks QUESTION 1 Total/15 PART3 CLO4 2 Marks /15 Question 1 PART 1 (10 marks) XYZ is considering buying a new equipment with the following expected cash flows: Year Project Cash Flows 0 (1,800,000) 1 900,000 2 1,500,000 3 7 4 5 800,000 1,400,000 During the third year the equipment will require maintenance with the cost of 1,200,000 (outlay), the operating inflows will be 200,000. -The required rate of return on this project is 12 percent. One of the objectives is to cover the initial outlay in 3 years. Based on the above information, 1.Calculate the third-year net cash flow. 1 Mark 2. Based on each of the following capital budgeting criteria, recommend if the firm should conduct the project or not. Justify your answer. (Show all the steps of your work) 9 Marks a. Payback 1 Mark PE 2