TLT Ltd is considering the purchase of a new machine for use in its production process. Management has developed three alternative proposals to help evaluate the machine purchase. Only one of these proposals can be implemented. Proposals A and B both have the same cost to set up, but the output from proposal A (as measured by future net cash flows) commences at a high rate and then declines over time, while Proposal B starts at a low rate and then increases over time. Proposal C involves buying two of the machines considered under proposal B. That is, proposal C is simply Proposal B scaled by a factor of two. Proposal C results in net cash flows which are similar in magnitude to proposal A's net cash flows in the first two years. The estimated net cash flows, internal rates of return and net present values at 9% and 11% for each proposal are given in the following table. End of Year 0 1 2 3 4 5 6 7 Sum of cash flows Internal rate of return NPV (at 9%) NPV (at 11%) Proposal A -$290,000 $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $200,000 18.2% $79,549 $59,348 Proposal B -$290,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 $200,000 12.8% $45,064 $20.359 Proposal C -$580,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 $200,000 $400,000 (1) (iii) For proposal C, what is: (1) the internal rate of return, (ii) the net present value at a discount rate of 9% and (iii) the net present value at a discount rate of 11%? Sketch the NPV profile for proposals A, B and C. Assume a linear relation between net present value and the discount rate (that is, use straight lines to connect the coordinates on the x and y axes). Mark all the relevant crossover point(s) on your sketch. If the required rate of return for NPV and IRR analysis is 9%, which proposal would you recommend and why? If the required rate of return for NPV and IRR analysis is 11%, which proposal would you recommend and why? Give possible reasons for any apparent conflict between the recommendations made using the net present value and internal rate of return methods. If there is no conflict explain why this is the case. Calculate the payback period for each proposal. Would the proposal with a shorter payback period be more "profitable" than one with a longer payback period? Explain