b) A company has budgeted for a capital investment of 160,000. There are three different project proposals Projects A-C but only one project can be chosen for investment. The Engineering Director has asked for your advice as to which project should be chosen for implementation. The following information is provided: Project A Project B Project C Capital expenditure 160000 160000 160000 Expected life 5 years 5 years 5 years Scrap value expected 10000 9000 7000 Cash flow - yr Cash flow - yr 2 Cash flow - yr 3 Cash flow - yr 4 Cash flow - yr 5 65000 65000 60000 55000 40000 70000 70000 40000 38000 38000 80000 75000 40000 40000 30000 Notes: 1. Capital expenditure for all three projects would be incurred immediately. 2. Taxation is to be ignored. 3. The company estimates its cost of capital to be 20% (Table A1 - page 4) You are required to calculate for each project; (ii) (iii) the net present value the internal rate of return the payback period (9 marks) c) State the relative merits of the methods of investment appraisal in parts b(i-iii). (3 marks) Continued overleaf