Rebel Restaurant Pte Ltd $("$RR$")$ is looking for a new location in shopping malls. RR is

considering purchasing a shop rather than leasing, as it has done in the past. Three retail

shops in a new mall are available. Each shop has its own advantages and disadvantages.

The owner of RR has completed an analysis of each shop that factors in the time value

of money. RR expects to pay a tax rate of $40\%$ for the next four years. The information

is as follows:

At the same time, RR has also received three proposals for a new micro$-$brewery machine

it intends to install in the shop instead of buying beer from local suppliers. Data on each

machine is as follows:

Required:

$($a$)$ The owner does not understand how the shop with the highest internal rate of

return also has the lowest net present value. Explain probable cause$($s$)$ of this

contradiction observed by the owner.

$(5$ marks$)$

$($b$)$ Based on the information available, which shop would you recommend that the

owner of RR choose? Explain your recommendation.

$(3$ marks$)$

$($c$)$ Compute each machine's payback period. Which machine would you recommend

the owner of RR choose? Why?

$(14$ marks$)$