a) A process to produce formalin from methanol has been designed. Cost data for this base case and the alternatives are shown in Table 2 where all figures are in $10 or $10%/year. The management also states that the maximum additional investment for any additional capital investment is $2 x 10%. Assume that the required before-tax return on investment is 15% per annum and the equipment life is considered to be 12 years. Recommend the best alternative and also the minimum saving in operating costs required to make this an attractive investment. Items Table 2 Details on the alternatives to be considered Capital Investment Additional Investment Alternative 1 (Base Case Design) 11.9 (9 marks) Alternative 2 Alternative 3 ། - 1.02 0.5 Annual Product 11.1 11.1 11.1 Revenue Annual Raw Material 3.16 3.16 3.16 Costs All Other Annual 0.299 0.206 0.258 Operating Costs b) Aubudaem Berhad is considering investments in large capital projects. You are hired as a consultant to help them in making decision on which of the following projects to invest in, as shown in Table 3. All projects are not mutually exclusive. Table 3 Details of the projects Items Capital required (in year 0) Project A $90 million Project B $120 million Project C $180 million After-tax yearly cash flow (year 1-10) $15 million $20 million $26 million Recommend the best project or combination projects for investment if the requirement set by the company regarding the ceiling value of the capital is $270 million. Assume that the investment made in each project will have the same return as investing in long term bonds, currently yielding 8% per annum (after tax), and a project life of 10 years. (8 marks)