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QUESTION TWO Faulu Limited has approached you for advice on an equipment to be purchased for use in a five year project. Shs. The investment will involve an initial capital outlay of Shs. 1.3 million and the expected cash flows are given below: Year Cash inflows Cash outflows Shs. 800,000 65,000 750,000 80,000 900,000 50,000 1,200,000 55,000 1,100,000 70,000 uw The equipment is to be depreciated on a straight line basis over the duration of the project with a nil residual value. The cost of capital and the tax rate are 12% and 30% respectively. Required: The net present value (NPV) of the investment. (8 marks) (b) In the context of capital budgeting, explain the difference between "hard rationing and "soft rationing (2 Marks) (Total: 20 marks)