Question 25 Track Co. is looking into the possibility of a new investment in in their manufacturing plant by using artificial intelligence so that the reject rate can be reduced to zero rate. The initial cost of the investment will be $650,000 with a book value at the end of its six years of life to be $100,000 The net book value at the end of each year and the net cash flows for each year are given in the table below. Year Initial Cost and Book Value Annual Cash Flows 650,000 500,000 380,000 280,000 200,000 140,000 100,000 200,000 200,000 190,000 160,000 130,000 100,000 All cash flows are assumed to be incurred at the end of each year. The salvage value of the investment at the end of six years will be 50,000. The target payback period based on discounted cash flows is five years and the cost of capital for all new investment is 12%. Extract from Present value table is given below: DF\Year 0 1 2 3 4 5 6 12% 1.00 0.893 0.797 0.712 0.636 0.567 0.507 18% 1.00 0.847 0.718 0.609 0 .516 0.437 0.370 Required: a) Ascertain the annual accounting rate of return for the new investment. (5 marks) b) Ascertain the cash payback period for the investment. (4 marks) c) Compute the discounted payback period and the net present value (NPV) of the investment. (10 marks) d) Compute the internal rate of return (IRR) of the investment. (4 marks) c) Should the investment be undertaken based on your calculation made above? (2 marks) (Total: 25 Marks)