Sure i can pay but how can i wire my money? $3$ TWO PROJECTS

A company wishes to use a five$-$year time scale over which to appraise the following projects, with no

allowance for scrap values. Its required rate of return is $17\%.$

Project $x$

Purchase of patent rights to a new process at an initial cost of $$320,000$ payable immediately.

The new process will enable the company to reduce its labour force, at present incurring a total wages bill

of $$280,000,$ by a quarte; and will allow an increased production capacity of $5,000$ units per year of

another existing product which at present is sold at $$12$ per unit with direct costs of $$6.$ There is an $80\%$

chance that the extra potential production could all be sold, with a $20\%$ chance of demand only taking up

an extra $3,000$ units per year. Production would be adjusted to match demand. This product is made with

harcly any labour.

Project $Y$

Installation of a mini$-$computer to deal with the accounting functions at an annual rental charge of

S$50,000,$ paid in advance At present the company uses an IT service bureau at a cost of approximately

$$90\mathrm{.}000$ per year payable in arrears. This will be run $"$in parallel" for the first year. The installation will

result in staff being sent on a training course during the first year which is expected to $cos1510,000,$ and

the employment of a consultant for the first year, to whom $$5,000$ will be payable in six months 'time and

another $$5,000$ in twelve months' time.

Required:

Determine which $($if either$)$ of the projects are worth further consideration based on the information given.

assuming all cash flows arise at the end of the year to which they relate unless otherwise stated.