QUESTION 4 (CLO 4, 25 MARKS) BMC Medical Clinic is investigating the probability of investing in new CAT scan and blood analysis equipment. Cash flows for the two independent investment projects are as follows: Required: a. b. The cash flows for the CAT scan machine will decline over time due to expected increases in operating and maintenance costs. The cash flows for the blood analysis equipment are expected to increase as word is spread that the clinic is performing these new services. Both projects require an initial investment of RM500,000. In both cases, assume the equipment has a life of 5 years with no salvage value. C. Year 1 2 d. 3 4 5 CAT scan machine RM300,000 150,000 200,000 100,000 50,000 Blood Analysis Equipment RM50,000 50,000 300,000 400,000 450,000 Assuming a discount rate of 12 percent, compute the net present value (NPV) of both types of equipment. (4 marks) Compute for payback period for each item. Assume that the manager of the clinic accepts only projects with a payback period of three years or less. Offer some reasons why this may be a rational strategy even though the NPV computed in the above Requirement (a) may indicate otherwise. (6 marks) Compute the accounting rate of return for each project using initial investment. (8 marks) Suggest 4 qualitative (non-financial) factors that might influence the management's decision on the selection of the equipment. (7 marks)