Question 4: (26 marks) One Hawk Ltd. is evaluating a project on purchasing new automation equipment to improve its production capacity. This project would require an initial investment of S1.2 million. The new equipment will have a useful life of 10 years with a residual value of $75,000 at year 10. One Hawk will use straight-line depreciation method. With the automation equipment, production and sales are expected to increase by 8,000 units per year for the next 10 years. Selling price will remain $180 per unit. Total variable cost is still s128 per unit, but the annual fixed costs will increase by $102,000, All cashflows are assumed to occur at the end of each year. One Hawk evaluates this project using a 15% after-tax discount rate. The corporate tax rate is generally 30% in Australia, Required: a) Given the expected increase in sales, calculate the incremental before-tax profit for each year. (5 marks/ Click or tap here to enter text. b) Calculate the annual incremental after-tax cash flows for each year for the company's project on purchasing the automation equipment. [14 marks/ (Hint: prepare table of before- and after-tax annual cashflows, discount factor, present value of annual cashflows) Click or tap here to enter text. c) Based on your calculations, should the company invest in the automation equipment? Calculate and interpret each of the following for the project: [7 marks/ D) Net present value Click or tap here to enter text ii) Internal rate of Return (Hint: use Goal Seek function in Excel or trial and error method) Click or tap here to enter text. iii) Payback periods Click or tap here to enter text. -End of the Document