This is your second homework. The answers must be submitted until 19.00 next Tuesday (May 12). Submission later than this date will be penalized. The weight of each question is given below in the parenthesis. Question: A firm wants to buy a computerized lathe in 2020. There are two candidates. The first lathe (Project A) is a Chinese made lathe whose price is $ 4 000 000. The second candidate is a German made lathe whose price is $ 6 000 000. The firms wants to choose one of them and uses both discounted payback method and Net PV method for evaluation. Both machines have an equal lifetime of 5 years and firm uses a discount rate 15% in both methods in discounted payback method and net PV method). The expected cash flows of Chinese lathe (Project A) are as follows (cost of investment is paid in 2020) 2021 $ 2 000 000 2022 $2 500 000 2023 $ 3 000 000 2024 $ 3 000 000 2025 $ 2 000 000 The firm expects to sell Chinese lathe at the end of 2025 for a value of $ 700 000 (salvage value is $ 700 000) The expected cash flows of German lathe (Project B) are as follows (cost of investment is paid in 2020) 2/2 2021 $ 2 500 000 2022 $ 3 000 000 2023 $3200 000 2024 $ 4 000 000 2025 $ 4 700 000 The firm expects to sell the German lathe by the end of 2025 for a value of $ 3 500 000 (salvage value is $ 3 500 000). a) What is exact payback period of Chinese lathe (15 pts.) b) If the firm's desired payback period is 3 years; is the Chinese lathe an acceptable investment (5 pts.) c) What is the exact payback period of German lathe (15 pts.) d) Is German lathe an acceptable investment if desired payback period is 3 years? (5 pts) e) Which lathe is a better investment according to Discounted Payback Method (10 pts.) f) What is the Net PV of the Chinese lathe? (10 pts.) g) Is Chinese lathe an acceptable investment according to Net PV? (5 pts) h) What is the Net PV of German lathe ? (10 pts) 1) Is German lathe an acceptable investment according to Net PV method? (5 pts) 1) Which lathe is a better investment according to Net PV method? (10 pts) k) Given all these evaluations above, what is your final decision? Will you buy Chinese or German lathe? (10 pts.)