The directors of Sisco Bank are currently considering purchasing a new plant. Based on the information provided in the financial statements, they have determined that only a maximum of 750,000 can be made available for this investment project. The relevant facts concerning three possible choices are as follows: Plant 1 Plan 2 Plant 3 Capital expenditure required - year 0 600,000 600,000 650,000 Estimated life years 4 4 4 Residual value nil nil nil Net cash flow, years 1-3 250,000 150,000 200,000 Net cash flow year 4 100,000 300,000 250,000 In addition to this, the profits for each plant are expected to be 50% lower than the estimated cash flow in each year. Assume a discount rate of 10% for which the present value factors are: Year 1 Year 2 Year 3 Year 4 0.9091 0.8264 0.7513 0.683 (a) Calculate ARR for each plant. (b) Calculate NPV for each plant. (c) Using linear interpolation as suggested in Collier, calculate the Internal Rate of Return (IRR) for each plant. (d) Using your answers from parts a) to c), discuss which of the three plants you think Mylo Ltd should buy. (e) Explain three key weaknesses of the Internal Rate of Return (IRR) method.