Norwich Tool, a large machine shop, is considering replacing one of its lathes with either of two new lathes-lathe A or lathe B. Lathe A is a highly automated, computer-controlled lathe; lathe B is a less expensive lathe that uses standard technology. To analyse these alternatives, Mario Jackson, a financial analyst, prepared estimates of the initial investment and incremental (relevant) net cash inflows associated with each lathe. These are shown in the following table. Lathe A Lathe B Initial investment (1/ ) $660 000 $360 000 Year (t) Net cash inflows (CF) $128 000 $88 000 182 000 120 000 166 000 96 000 UI AWN 168 000 86 000 450 000 207 000 Note that Mario plans to amortise both lathes over a five-year period. At the end of that time, the lathes would be sold, thus accounting for the large fifth-year net cash inflows. Mario believes that the two lathes are equally risky and that acceptance of either of them will not change the firm's overall risk. He therefore decides to apply the firm's 13% cost of capital when evaluating the lathes. Norwich Tool requires all projects to have a maximum payback period of four years. Required 1 Use the payback period to assess the acceptability and relative ranking of each lathe. 2 Assuming equal risk, use the following sophisticated capital budgeting techniques to assess the acceptability and relative ranking of each lathe: a net present value b internal rate of return.Norwich Tool, a large machine shop, is considering replacing one of its lathes with either of two new lathes-lathe A or lathe B. Lathe A is a highly automated, computer-controlled lathe; lathe B is a less expensive lathe that uses standard technology. To analyse these alternatives, Mario Jackson, a financial analyst, prepared estimates of the initial investment and incremental (relevant) net cash inflows associated with each lathe. These are shown in the following table. Lathe A Lathe B Initial investment (1/ ) $660 000 $360 000 Year (t) Net cash inflows (CF) $128 000 $88 000 182 000 120 000 166 000 96 000 UI AWN 168 000 86 000 450 000 207 000 Note that Mario plans to amortise both lathes over a five-year period. At the end of that time, the lathes would be sold, thus accounting for the large fifth-year net cash inflows. Mario believes that the two lathes are equally risky and that acceptance of either of them will not change the firm's overall risk. He therefore decides to apply the firm's 13% cost of capital when evaluating the lathes. Norwich Tool requires all projects to have a maximum payback period of four years. Required 1 Use the payback period to assess the acceptability and relative ranking of each lathe. 2 Assuming equal risk, use the following sophisticated capital budgeting techniques to assess the acceptability and relative ranking of each lathe: a net present value b internal rate of return