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5.3 Evaluation of Profitability or Non-Profitability of Business Proposal Application of Single Alternative Evaluation using PW Method Present value (PW) is needed to have better financial planning. To gain the present value (PW), we need to analyze our initial cost, profit per year, expenses and machine lifetime Table 5.2 shows the summary of total machinery cost. Table 5.2: Summary of Total Machinery Cost Printer Canon Thermal Printer Computer Set Description Front Desk Counter + Unit x1 x1 x1 I Cost RM150 RM50 RM1,000 RM500 Replace GE D ilil 8 O If the PW indicates a positive result, the project can be carried out and accepted; however, if the PW indicates a negative result, the project will incur losses and should not be carried out. If the PW is zero, on the other hand, it indicates that the project is break-even and unprofitable. The acceptable rate of return for our company in this project is 7 percent annually. Thus: Total revenue Average price after markup x Quantity of regular camp TR = P x Q The sunk cost of the machinery after a particular time is also known as balance (F). by assuming that after 15 years of operation, the machinery cost will drop to 80% from its original price. F= 20 100 TR =RM 2003.73 F = Table 5.3 shows the parameters needed to obtain the value of present worth (PW) by considering the interest rate 7% per year. Table 5.3: Parameters used to Calculate PW Initial Cost (P) Total revenue (A1) Ownership Cost (A2) Balance (F) Machine Life Time (n) RM 2003.73 RM133,350 15 years By using all the parameters above, we can now calculate the PW as below: PW = Po + (A1 + A2) (P/A, i,n)+F( P/F ,i,n) PW= The current value is above zero and. As a result, the investment is effective and justifiable