QUESTIONS ARK Colour Design Plc is a specialist company which manufactures stationery. The majority of its customers are domestic retailers, schools and universities. ARK Colour Design Plc has experienced strong growth over recent years and has built strong relationships with their customers due to the company's focus on quality and on-time delivery. In order to remain competitive, the company is looking to expand its operations and purchase new plant, including an advanced 3D printer. After research, the company found two 3D printer models which meet its requirements (Canon and HP) The projects are estimated to last for five years. The forecast cash flows for both 3D printer models are as follows: Project Canon Model HP Model 600,000 500,000) Initial Investment Cash inflows forecasts: Year 1 Year 2 Year 3 Year 4 Year 5 200,000 300,000 400.000 250,000 100,000 100,000 150 000 200,000 250,000 150,000 The company's cost of capital is 15% Required: a) Appraise the two projects using the following methods of investment appraisal: Payback period (4 marks) ii. Net present value (6 marks) (Present Value tables are provided at the end of this paper). b) Based upon your calculations from part (a), state, with reasons, which, if any, of the two 3D printer projects the directors of ARK Colour Design Pic should accept. (4 marks) c) Identity and discuss any other factors that ARK Colour Design Plc should consider before arriving at a decision (6 marks) d) Critically discuss the usefulness of the accounting rate of return method of making capital investment decisions (5 marks) (Total: 25 marks) (QUESTION 6 STARTS ON THE NEXT PAGE) Module Code LACNOOC 2 Page 8 of 10