(a) In one environmental project, a solar heating system will be installed to replace the natural gas boiler, which will result in an annual fuel savings of 4000HK$/ year. The initial investment of this solar heating system is 28000HK. The life-time of the system is 25 years, while the interest rate is 12%. Furthermore, according to a new policy, by the end of the 5 th year, a government subsidy of 2800HK$ will be provided for this solar heating system. The net salvage value of this system is 2000 HK\$. The annual maintenance cost is 300HK \$/year over the whole life-time of the system. Moreover, by the end of the 10 th and the 20 th year, a key component should be replaced, which will cost 4000HK and 6000HK, respectively. What is the net present value (NPV) of this solar heating system? (3 marks) What is the internal rate of return (IRR) of this solar heating system (for this sub-question, the trial and error processes can stop if NPV(IRR)50) ? (6 marks) Based on the above NPV and IRR values, please determine whether this investment is attractive or not. An alternative investment plan for the environmental project mentioned in the subquestion (a) is to invest a heat exchanger system for the natural gas boiler. By this heat exchanger system, an annual fuel savings of 2600HK \$year will be achieved. The initial investment of this heat exchanger system is 18000HK, while the lifetime of the system is 25 years. The interest rate is 12%. The net salvage value of the heat exchanger system is 500HK$. The annual maintenance cost is 150HK$ year over the whole life-time. Furthermore, by the end of the 15 th year, a key component should be replaced, which will cost 5000HK. There is no government subsidy for this heat exchanger system. What is the net present value (NPV) of this heat exchanger system? (2 marks) What is the internal rate of return (IRR) of this heat exchanger system (for this sub-question, the trial and error processes can stop if NPV(IRR)50) ? Based on this IRR value, please evaluate the worthiness of the investment of this heat exchanger system. (7 marks) Please use the incremental net BCR method to compare this heat exchanger system with the solar heating system introduced in the sub-question (a). Which one is superior? (5 marks) (a) In one environmental project, a solar heating system will be installed to replace the natural gas boiler, which will result in an annual fuel savings of 4000HK$/ year. The initial investment of this solar heating system is 28000HK. The life-time of the system is 25 years, while the interest rate is 12%. Furthermore, according to a new policy, by the end of the 5 th year, a government subsidy of 2800HK$ will be provided for this solar heating system. The net salvage value of this system is 2000 HK\$. The annual maintenance cost is 300HK \$/year over the whole life-time of the system. Moreover, by the end of the 10 th and the 20 th year, a key component should be replaced, which will cost 4000HK and 6000HK, respectively. What is the net present value (NPV) of this solar heating system? (3 marks) What is the internal rate of return (IRR) of this solar heating system (for this sub-question, the trial and error processes can stop if NPV(IRR)50) ? (6 marks) Based on the above NPV and IRR values, please determine whether this investment is attractive or not. An alternative investment plan for the environmental project mentioned in the subquestion (a) is to invest a heat exchanger system for the natural gas boiler. By this heat exchanger system, an annual fuel savings of 2600HK \$year will be achieved. The initial investment of this heat exchanger system is 18000HK, while the lifetime of the system is 25 years. The interest rate is 12%. The net salvage value of the heat exchanger system is 500HK$. The annual maintenance cost is 150HK$ year over the whole life-time. Furthermore, by the end of the 15 th year, a key component should be replaced, which will cost 5000HK. There is no government subsidy for this heat exchanger system. What is the net present value (NPV) of this heat exchanger system? (2 marks) What is the internal rate of return (IRR) of this heat exchanger system (for this sub-question, the trial and error processes can stop if NPV(IRR)50) ? Based on this IRR value, please evaluate the worthiness of the investment of this heat exchanger system. (7 marks) Please use the incremental net BCR method to compare this heat exchanger system with the solar heating system introduced in the sub-question (a). Which one is superior