Based on the information provided below, Should the company proceed with the investment? Use NPV & IRR to evaluate the project.

Old Machine Proposed new Machine

Asset cost $150,000 $180,000

Age of machine 10 years 0 years

Useful Life 15 years 5 years

Salvage value $15,000 0

Revenue $500,000 $550,000

Maintenance cost $6,000 $10,000

Electricity cost $20,000 $25,000

Shipping cost - $6,000

Freight insurance - $2,000

Installation & Commissioning expense - $12,000

Working capital:

Cash $15,000 $25,000

Trade debtors $30,000 $40,000

Inventory $24,000 $34,000

Trade creditors $40,000 $50,000

Accruals $10,000 $15,000

Current portion of long-term Loan $8,919 $15,977

Long-term Loan (non-current portion) $46,435 $84,022

Interest rate 10.75% 11.25%

Interest Expense $7,539 $11,250

Instalment payment $16,458 $27,227

Depreciation is on straight-line method. The current machine can be sold today for $75,000. The new machine can reduce labour by cutting cost from $36,000 to $30,000 a year. The estimated selling price of the new machine at the end of its useful life is $35,000. Should company proceed with the replacement, they have to use their other factory lot now leased to a third party for $700 per month. The company spent $30,000 on rewiring/renovation of the factory now leased to the third party. It is expected that only 90% of companys investment in working capital will be recovered. Companys tax rate is 40% and its WACC is 11.00%