QUESTION 3 Baze University is evaluating two investment projects, as follows Project 1 This is an investment in new machinery to produce a recently-developed product. The cost of the machinery, which is payable immediately, is $1.5 million, and the serup value of the machinery at the end of four years is expected to be $100,000. Tax-allowable depreciation can be claimed on this investment on a 25% reducing balance basis. Information on future returns from the investment has been forecast to be as follows: Year 140,00 Sales Volume (unit/Year) 50,000 95,000 0 75.000 Selling Price (S/unit) 25 23 23 Variable Cost (S/unit) 10 12 125 105.00 115,00 125,00 125,00 Fixed cost (year) 0 0 3 4 24 11 This information must be adjusted to allow for selling price inflation of 4% per year and variable cost inflation of 2.5% per year. Fixed costs, which are wholly attributable to the project, have already been adjusted for inflation. Baze pays profit tax of 30% per year one year in arrears. No plagiarism please Page 3 of 4