Year Cash Flow Procc -260,000 5,000 15,000 15,000 425,000 45.000 5,000 500 500 Risk-free rate-49, return on stock market index-12% and beta for the project should the firm choose if you? a) Apply the payback criterion. Why? b) Apply the discounted payback criterion. Why? c) Apply the NPV criterion. Why? d) Apply the IRR criterion. Why? e) Apply the profitability index criterion. Why? D Based on your answer in (a) through (e), which project would you finally c QUESTION 2 (25 points) a) A machine has a cost of RM180,000. It will have a life of 3 years, and will be depreciated straight line to zero salvage value. It will result in sales revenue of RM200,000 per year and cash operating costs of RM110,000 per year. Use of the machine will require an increa RM70 000 for the 3 years be tax rate is 40%. se in working capital of ginning at year O. The appropriate discount rate is 8% and the firm's i. Calculate the initial cash flow at time 0 ii. Calculate the annual operating cash flows (they are identical each year). iii. Calculate the relevant terminal cash flows at the end of year 3. iv. What is the NPV for the machine? (10 points) b) A project requires an initial investment in equipment of RM90,000 and then requires an initial investment in working capital of RM10,000 (at t0). You expect the project to produce sales revenue of RM 120,000 per year for three years. You estimate manufacturing costs at 60% of revenues. (Assume all revenues and costs occur at year-end, i.e., t-1,t -2, and t 3.) The equipment depreciates using straight-line depreciation method over three years. At the end of the M10,000 and also recover the investment in net project, the firm can sell the equipment for R working capital. The corporate tax rate is 30 percent and the cost of capital is 15%. i. Calculate the NPV of the project. ii. he project if the revenues were higher by 10 percent and the costs What is the NPV of t were 65 percent of the revenues? (15 points