Required: Identify and briefly explain whether each of the above transactions would be treated as a incremental cash flow, sunk cost or an opportunity cost, in developing the relevant cash flows associated with the proposed replacement decision. (15 marks) Question 2 IDT Limited is network engineering company in Singapore. Following the government's announcement to transform the city into a smart nation, by harnessing technology and connectivity in every citizen's lifestyle, IDT Limited has tendered for several projects relating to this national initiative. But due to capital resource constraint, the company would only be able to undertake one of the three projects under consideration and the cash flows for each of them are shown in the following table. The company has a 12% cost of capital. Year (t) 1 2 4 5 Project 1 Project 2 Project 3 0 Initial Investment 200,000 200,000 200,000 25,000 60,000 100,000 40,000 60,000 80,000 Cash Flows 55,000 60,000 60,000 70,000 60,000 40,000 85,000 60,000 20,000 Required: (a) Calculate each project's Payback period. Which project is preferred using the Payback Period method? (6 marks) (b) Calculate each project's Net Present Value (NPV). Which project is preferred using the NPV method? (16 marks) (c) Calculate each project's Profitability Index (Pl). Which project is preferred using the PL method? (8 marks) (d) Comment on your findings to the above parts (a), (b) and (c), and recommend the best project to implement. Give reason(s) for your recommendation. (5 marks) (e) Critically evaluate the strengths and weaknesses of the NPV method as a basis of project evaluation