Tolkien Transport is planning a refurbishment of its depot in Leeds, which will involve investment in new garage and repair facilities to speed servicing of vehicles. After initial screening, two alternative designs have been identified (labelled here A and B) and you are asked to undertake an investment appraisal of the two identified options, which are mutually exclusive. The assumption is that they both have an eight-year life and that there is some salvage value at the end of Year 8; for Option A this is 40,000 and Option B, 30,000. The initial outlay (in Year 0) required for each option varies and they will yield different levels of cash flows over their eight-year lives which arises from the labour and time savings from using the new facilities. Tolkien Transport wishes to use an 8% discount rate for Option A, but a 10% discount rate for Option B which uses an innovative design that is considered riskier. For Option A, there will be a need for further investment in Year 5 to update equipment; this is not the case for Option B. The net annual cash flows (in 000s) of the two options under consideration are as follows: a) Estimate the payback period for each option. Suggest which of them (if any) is worthwhile if it is the companys policy not to take any option with a payback period longer than 5 years. (5 marks) b) Calculate the Net Present Value (NPV) for each of the options. Which option is preferable according to this technique? Explain your reasoning. (10 marks) c) Calculate the internal rate of return (IRR) of the two options. Interpret your results. (10 marks) d) Write a brief report (of about 150 words) for the Tolkien Transport management team advising the company on which option it should choose. Give reasons for your decision and identify any limitations of the methods applied. Please explain in detail