Question 4: Investment Appraisal Methods (25 points) Red Operations plc. is considering the following project: . Selling 150,000 cartons of machine screws per year at price of 12 to support the manufacturing needs of a customer over the next five years. Investing 780,000 to install the equipment necessary to start production. This equipment will be depreciated using 18% reducing balances over the project's life. The estimated salvage value is 50,000. Fixed production costs will be 240,000 per year, and variable production costs should be 8.50 per carton. An initial investment in net working capital of 75,000 is needed. This amount will be collected at the end of the project. Tax rate is 23%. Discount rate is equal to the WACC of 16%. 1. The net income per year. (5 points) 2. Calculate the net present value (NPV) of the project. (5 points) 3. Calculate the profitability index (PI) of the project. (5 points) 4. Calculate the payback period of the project. (5 points) 5. Based on the part 2 and 3, what is your advice to the firm regarding this project? Explain. (5 points) Question 4: Investment Appraisal Methods (25 points) Red Operations plc. is considering the following project: . Selling 150,000 cartons of machine screws per year at price of 12 to support the manufacturing needs of a customer over the next five years. Investing 780,000 to install the equipment necessary to start production. This equipment will be depreciated using 18% reducing balances over the project's life. The estimated salvage value is 50,000. Fixed production costs will be 240,000 per year, and variable production costs should be 8.50 per carton. An initial investment in net working capital of 75,000 is needed. This amount will be collected at the end of the project. Tax rate is 23%. Discount rate is equal to the WACC of 16%. 1. The net income per year. (5 points) 2. Calculate the net present value (NPV) of the project. (5 points) 3. Calculate the profitability index (PI) of the project. (5 points) 4. Calculate the payback period of the project. (5 points) 5. Based on the part 2 and 3, what is your advice to the firm regarding this project? Explain. (5 points)