QUESTION THREE $(20$ MARKS$)$ a$)$YNot Ltd is considering a new investment in machinery at a cost of Ksh $4\mathrm{.}25$ Million. The machinery has an economic useful life of $5$ years. The scrap value $($residual value$)$ of the machinery in $5$ years$$ time is expected to be Ksh $500,000/=.$ The project will generate annual operating sales revenue of Ksh $4\mathrm{.}5$ Million while its annual operating costs are projected to be Ksh $2\mathrm{.}9$ Million per year including depreciation. The new machinery will require an investment of Ksh $600,000/=$ in working capital at the beginning of the project, which will be recovered at the end of the project$$s life in $5$ years$$ time. If YNot Ltd$$s cost of capital is $14\%,$ and the tax rate is $30\%$ what is the project$$s NPV$?$Should the company accept the project? $(10$ Marks$)$ b$)$Car clean Company operates a car wash business. The Company bought a machine two years ago at a price of sh$\mathrm{.}60,000/=.$ The life span of the machine is $6$ years and the machine has no disposal value. The current market value of the machine is sh$.20,000/=$ The Company is considering buying a new machine. The cost of the new machine is $100,000/=$ and its life span is four $(4)$ years. The new machine has a disposal value of $20,000/=.$ The new machine is faster than the old one and so the management believes that the revenue will increase from $1$ million annually to $1\mathrm{.}03$ million. In addition the new machine is expected to save the company $10,000/=$ in water and electricity costs. The discount rate of Car Clean Company is $15\%$; and the corporate tax rate is $40\%$ What is the NPV & IRR of replacing the old machine? $(10$ Marks$)$ There is no additional information to this qurstion