Flex Star's bag$-$making division specializes in manufacturing plastic components for the small pet

food market. These components are produced in high$-$volume runs, with equipment often operating

around the clock for consecutive days to maintain production consistency. Additionally, the division

fulfills low$-$volume orders with unique specifications. One of the machines in this department

requires replacement. Currently valued at CAD $$13,000,$ the machine must be replaced due to

upcoming safety regulations. This machine produces Flat bottom bags of which incur fixed costs,

including depreciation, the relevant details of which are as follows:

Note that: All the fixed costs $($including depreciation$)$ are directly related to the production of Flat

bottom bag.

Projections indicate that current revenue and costs will increase $10\%$ each year for the next five

years, aligning with the expected lifespan of the new machine under review. Introducing this new

machine would reduce variable costs by CAD $$8,000$ for A$.$ Acquisition and installation costs for the

new machine are estimated at CAD $$100,000,$ with a $$10,000$ residual value after five years.

Company policy dictates straight$-$line depreciation for such machinery, with a cost of capital set at $10$

percent. Alex wanted to invest in this machine but was not certain about the best approach to

evaluate this investment.