A food processing shop in Accra (Biem) is considering adding a new line and you are hired to conduct the capital budgeting analysis. Biem needs to increase production capacity to meet increasing demand for an existing products, Quado, which is used in food processing. A new machine, with a useful life of four years and a maximum output of 600,000 kg of Quado per year, could be bought for GHC 800,000, payable immediately. The scrap value of the machine after four years would be GHC30,000. Biem is in the 25 percent tax bracket. Forecast demand and production of Quado over the next four years is as follows: Year 1 2 3 4 Demand (kg) 1.4m 1.5m 1.6m 1.7m where m is million. Existing capacity for Quado is limited to one million kilograms per year. The current selling price of Quado is GHC8.00 per kilogram and variable cost of materials is GHC 5.00 per kilogram. Other variable costs of production are GHC 1.90 per kilogram. Fixed costs of production associated with the new machine would be GHC 240,000 in the first year of production, increasing by GHC 20,000 per year in each subsequent year of operation. Biem charges depreciation of 25 percent on straight line basis and this is tax allowable. Biem uses its after-tax weighted average cost of capital of 10 percent when appraising investment projects. Is the proposed machine purchase suitable for Biem? What will your decision be if the discount rates are 5 percent, 15 percent 20 per cent and 25 percent?