Your firm owns a large earthmoving machine that may be renovated to increase its production output by an extra 8 m3/hour, with no increase in operating costs. The renovation will cost

` 500,000. The earthmoving machine is expected to last another eight years, with zero salvage value at the end of that time. Earthmoving for this machine is currently being contracted at ` 14/m3. The company is making an 18 per cent return on their invested capital. You are asked to recommend whether or not this is a good investment for the firm. Assume the equipment works 1,800 hours per year. (Hint i 5 18%)