Question 3 Wilson plc is a renowned manufacturer that specializes in manufacturing advanced tennis rackets. The company is currently looking to expand its manufacturing capabilities and it is exploring new markets with cheaper labour. The company is considering investing in a new manufacturing plant in Egypt and develop a new array of products. This project needs an immediate cash investment of 4,000,000. There is no residual value at the end of the project. The net cash flows for the five years of the project are expected to be: (4,000,000) Initial Investment Net Cash flows forecasts: Year 1 Year 2 Year 3 Year 4 Year 5 600,000 800,000 1,400,000 1,500,000 700,000 Required: a) Calculate the payback period for the above project and state whether the business should invest in the new plant in Egypt if it is the company's policy not to take on a project with a payback period longer than 3 years. (4 marks) b) Calculate the Net Present Value (NPV) assuming that your company's cost of capital is 10%. Suggest if the project is acceptable and explain the reason(s) behind your recommendation. (Present Value tables are provided at the end of this examination paper). (6 marks) (Total: 10 marks)