QUESTION 5 (20 MARKS) Nusuara Technology Berhad is considering to buy a new equipment with a life of 2 years. Price of the equipment is RM15,000. You are preparing a proposal to present to your General Manager regarding the purchase of the equipment. To assist your report, you gather probability data on future after-tax cash flows and demand for the companys products. Your study show that, in year 1 there is a 40 percent probability that there will be a net inflow of RM12,500 and 60 percent probability it will be RM14,500. If the first year inflow is RM12,500 then year twos cash flow can be RM11,500 or RM13,000 with a probability of 0.6 and 0.4 respectively. If the first years cash flow is RM14,500, then year twos cash flow can be RM13,000 or RM16,000 with a probability of 0.3 and 0.7 respectively. Knowing that your General Manager is a visual learner, you know that preparing the above date in a diagram form is a must. Assume, discount rate is 10 percent: (a) Draw a tree diagram to identify all possible cash flow streams. (4 marks) (b) Calculate the Net Present Value (NPV) for each branch. (6 marks) (c) Calculate the joint probability (PNPV) for each branch. (6 marks) (d) Calculate the expected Net Present Value, E(NPV). (2 marks) (e) Recommend your finding to your General Manager. (2 marks)