QUESTION 4: BUSINESS DECISIONS [20 MARKS] Suppose that ABC Ltd is considering purchasing one of three new processing machines. Either machine would make it possible for the company to produce its products more efficiently. Estimates regarding each machine are provided below: Machine C $244,000 Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows 10 years Machine A $79,000 7 years Nil $30,000 $ 7,000 Machine B $110,000 8 years Nil $ 60,000 $ 35,000 $30,000 $58,500 $18,500 A. If the projects cannot be repeated, which machine should ABC Ltd choose based on the NPV criteria at an 8% cost of capital? (9 marks) B. If the projects can be repeated, which machine should ABC Ltd choose based on the NPV criteria at an 8% cost of capital? (6 marks) C. Calculate the internal rate of return for Machine A? (Hint: internal rate of return is the rate which results in a zero NPV using linear interpolation), and discuss 1 drawback of the IRR against the NPV