A company plans to purchase a new machine due to the expected demand for a

new product. The machine costs Ghc185,000 and it is expected that the machine

shall be used for five (5) years with a scrap value of Ghc15,000. The company

expects the demand for the product to be as follows:

Year 1 2 3 4 5

Demand (Units) 25,000 30,000 35,000 40,000 20,000

%

Increase Selling Price 2% per year

Variable Cost of production 3% per year

Fixed production expenses 5% per year

The company's cost of capital is 10% and pays corporate tax at a rate of 25% in

the related year. Calculate the Net Present Value (NPV) of purchasing the new

machine advice whether it makes economic sense to buy the new machine.