Question 1. Castor Itd is considering expanding its production capacity by purchasing a new machine, the WA20. The cost of the new machine is 3 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a 35,000 feasibility study to analyze the decision to buy the WA20, resulting in the following estimates: Marketing : Once the WA20 is operating next year, the extra capacity is expected to generate 14 million per year in additional sales, which will continue for the 5-year life of the machine. Operations : The disruption caused by the installation will decrease sales by 4.9 million this year. Once the machine is operating next year, the cost of goods for the products produced by the WA20 is expected to be 75% of their sale price which is similar to the last few years. The increased production will require additional inventory of 1.12 million every year to be added in year 0 and depleted in year 5. Human Resources: The expansion will require additional sales and administrative personnel at a cost of 2.10 million per year. Accounting : A capital allowance is charged at the rate of 18% (reducing balance method). Castor's marginal corporate tax rate is 35%. REQUIRED: Determine the incremental cash flows from the purchase of the WA20. Calculate the Internal rate of Return of this project. Explain how each item is or is not an incremental cash flow in this statement. (maximum word count for this part is 300 words)