10 years QUESTION 34- Net Present Value-Decision Making [30 marks Suppose that Nishi Farming Ltd is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below: Japan Machine China Machine Original cost $113,250 $270,000 Estimated life 10 years Salvage value Nil Nil Estimated annual cash inflows $30,000 $ 60,000 Estimated annual cash outflows $ 7,500 $15,000 Instructions (a) Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. (b) Based on your answer to (a), which machine should be purchased? (c) Nishi Farming Ltd did some further research and found one other possible machine that would produce the same type of production efficiencies. The information regarding Machine USA is below: USA Machine Original cost $250,000 Estimated life 10 years Salvage value $ 30,000 Estimated annual cash inflows $ 45,000 Estimated annual cash outflows $ 10,000 (1) Calculate the net present value and profitability index for Machine USA. Use an 8% discount rate (2) Rank the three investments based on net present value. Which machine would be chosen based on this calculation? (3) Rank the three investments based on profitability index. Which machine would be chosen based on this calculation