Please answer A with detailed explanation. (how you worked it out)

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aumen years mes Sho SECTION A: Question is compulsory and must be attempted Question 1 Buli H Plc is considering purchasing a new machine to alleviate a bottleneck in its production facility. At present it uses an old machine which can process 200 units of product P per hour, H Plc could replace it with machine AB, which is product specific and can produce 500 units per e hour. no Machine AB costs K500.000. If it is installed, two members of staff will have to attend a short course, which will cost the company a total of 5,000. Removing the old machine and preparing the area for machine AB will cost K20,000. The company expects demand for product P to be 12,000 units per week for another three years. After this, early in the fourth year, the new machine would be scrapped and sold for K 50,000. The existing machine will have no scrap value. Each Peams a contribution of K1.40. The company works a 40 hour week for 48 weeks in the year. H Ple normally expects a payback within two years, and it's after tax cost of capital is 10 percent per annum. The company pays corporation tax at 30 percent and receives writing down allowances of 25 percent, reducing balance. Corporation tax is payable quarterly, in the seventh and tenth months of the year in which the profit is earned, and in the first and fourth months of the following year. Required: (a) Prepare detailed calculations that show whether machine AB should be bought, and advice the management of H Ple as to whether it should proceed with the purchase. (20 marks) (b) Advice what other financial and strategic factors should be considered when deciding whether to proceed with this project. (10 marks) (e) Discuss the comparative advantages and limitations of NPV and IRR methods of project appraisal. (10 marks) Total (40 marks) 1 aumen years mes Sho SECTION A: Question is compulsory and must be attempted Question 1 Buli H Plc is considering purchasing a new machine to alleviate a bottleneck in its production facility. At present it uses an old machine which can process 200 units of product P per hour, H Plc could replace it with machine AB, which is product specific and can produce 500 units per e hour. no Machine AB costs K500.000. If it is installed, two members of staff will have to attend a short course, which will cost the company a total of 5,000. Removing the old machine and preparing the area for machine AB will cost K20,000. The company expects demand for product P to be 12,000 units per week for another three years. After this, early in the fourth year, the new machine would be scrapped and sold for K 50,000. The existing machine will have no scrap value. Each Peams a contribution of K1.40. The company works a 40 hour week for 48 weeks in the year. H Ple normally expects a payback within two years, and it's after tax cost of capital is 10 percent per annum. The company pays corporation tax at 30 percent and receives writing down allowances of 25 percent, reducing balance. Corporation tax is payable quarterly, in the seventh and tenth months of the year in which the profit is earned, and in the first and fourth months of the following year. Required: (a) Prepare detailed calculations that show whether machine AB should be bought, and advice the management of H Ple as to whether it should proceed with the purchase. (20 marks) (b) Advice what other financial and strategic factors should be considered when deciding whether to proceed with this project. (10 marks) (e) Discuss the comparative advantages and limitations of NPV and IRR methods of project appraisal. (10 marks) Total (40 marks) 1