Question 3 Project R delegates all the development work to outside companies. The estimated cashflows for Project Rare (where brackets indicate expenditure): Beginning of Year 1 Beginning of Year 2 Beginning of Year 3 End of Year 3 (150,000) (250,000) (250,000) 1,000,000 (contractors' fees) (contractors' fees) (contractors' fees) (sales) Project S carries out all the development work in-house by purchasing the necessary equipment and using the company's own staff. The estimated cashflows for Project S are: Beginning of Year 1 Continuous payments Through Year 1 Continuous payments Through Year 2 Continuous payments Through Year 3 End of Year 3 (150,000) (75,000) (250,000) (250,000) 1,000,000 (New equipment) (Staff Cost) (Staff Cost) (Staff Cost) (sales) REQUIRED a) Calculate the net present value for Project Rand Project S using a risk discount rate of 20% per annum. Using net present values as a criterion, which project is preferable? b) Find the internal rate of return for Project R and Project S and hence determine which project is more favourable using this criterion