Question 5 Robotech Limited has spent large amounts on research in developing an electronic lawn mower. The electronic lawn mower will be able to cut the grass by using an electronic remote control device. This device will allow the owner to sit by the swimming pool and relax while cutting the grass using a remote control device that includes a small television screen to control the lawn mower's direction. When the management of Robotech Limited decided to pursue this venture they forfeited the opportunity of a profit stream on a different project at a net present value of R12 million. The following information regarding the new venture is provided: Robotech Limited will require a plant to manufacture the electronic lawn mower, which will cost R45 million. An additional expense to renovate the plant for manufacturing purposes will amount to R5 million. In addition, an initial increase in working capital to R2.5 million will be required when production commences at the start of 2016. Robotech Limited estimated that they will sell 100 000 lawn mowers per annum for the next four years. The sale price per unit for the first year will be R250 per unit and it is estimated that the selling price will increase by 10% per annum for years two to four. Robotech Limited estimated that the total operating expenses will amount to R5 million in the first year and it is expected that the total operating expense will increase by 8% per annum for years two to four. According to SARS the wear and tear allowance will be 20% per annum on a straight line method over the plant's useful life of five years after which the plant can be sold at book value. Robotech Limited will be able to finance the business venture with a four year loan at an after tax cost of 12% per annum. A tax rate of 30% will apply to Robotech Limited. Required a. Calculate the net present value (NPV) and internal rate of return (IRR) methods of project evaluation