Question 2 The R.M. Company uses the following risk-adjusted discount rates for capital budgeting purposes: Investments in new product lines 16% Substitution of labour with capital (machinery) 10% Expansion of existing product lines 12% Replacement of existing equipment 8% The firm has $500,000 of available capital for investment. Project A involves the production of a brand new product line. Project B involves the replacement of existing machinery. Project C involves the purchase of a more sophisticated piece of equipment as a replacement for existing machinery. This more sophisticated machine will enable R.M. Company to reduce the size of its workforce. There are no other projects available at this time. Expected cash flows for these independent projects are as follows: Projects A (in thousands of dollars) - 400 - 500 - 100 Investment (t=0) Net after-tax cash inflows (t=1) (t=2) (t=3) (t=4) 160 130 150 150 140 180 130 210 Which project(s) would you recommend the company undertake? Show your calculations and provide any necessary explanations. (4 marks)