QUESTION 4 (30 marks) (a) ABC Inc. is considering two investment projects. Both projects have an initial cost of $38,000 and total expected cash inflows of $50,000. The cash inflows of Project AA are $6,000, $10,000, $16,000 and $18,000 respectively over the next four years. The cash inflows of Project BB are $18,000, $16,000, $10,000 and $6,000 over the next four years, respectively. The required yearly rates of return of both projects are 8% and the firm has a 3-year cut-off period for the projects. (i) Estimate the payback period and the net present value of the two projects. (16 marks) I (ii) Based on your calculations in (a), which project should be chosen if shareholders' benefits are of the highest priority? Briefly explain your answer. (4 marks) (b) Machinery will have to be purchased for a new project for the BadTaste Ltd at a cost of $40 million. For tax benefits maximization purpose, machinery will be depreciated at its full cost on a straight-line basis over its estimated useful life of 10 years. Salvage value of the machinery at the end of Year Eight (assume the project ends at Year Eight) is estimated to be $12m. At 30% tax rate and 10% cost of capital, what is the after-tax salvage value measured in today's dollar? (10 marks) -END