UESTION 3 (10 marks) a) You are starting an Italian wood-fired pizza restaurant and are looking to buy an electric motorcycle for delivery orders instead of a traditional petrol-based motorcycle, as you are worried about the impact the emissions generated from the deliveries will have on the environment. You are considering two models. Model 1 costs $10,000 and is expected to run for 5 years. Model 2 costs $15,000 and is expected to run for 8 years. The annual maintenance costs are $1,000 for Model 1 and $500 for Model 2. Assume that the cost of capital is 7 percent. In considering the initial outlay and ongoing annual expense of owning either of the electric motorcycles, which one should you buy? (5 marks) b) SmartTech L td is thinking about purchasing equipment that costs $1,500,000 for a new project. The equipment will produce sales of $500,000per an num for five years. Expenses associated with the sales will be $150,000 per annum. Consultancy and research and development (R\&D) costs incurred before the project commences will be $75,000. Other cash expenses will be $25,000 per year. The equipment is expected to sell for $100,000 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. SmartTech's tax rate is 30 percent and its cost of capital is 11 percent. i. What is the project's NPV and IRR? (3 marks) ii. Should SmartTech accept or reject the project? Why? (1 mark) iii. What other considerations should be made regarding the project decision? (1 mark)