Matacho SA$($ltd$)$ has an opportunity to pursue a capital budgeting project with a $5$year$-$year time horizon. This can be implemented in the area that is most profitable to increase the machine hours by $700$ machine hours. After careful study, Matacho SA$($ltd$)$ estimated the following costs and revenues for the project:

Cost of new equipment needed R$420,000$

Installation of new equipment R$40,000$

Sale of old equipment no longer needed R$40,000$

Working capital needed R$25,000$

Equipment maintenance in Year $2$ R$28,000$

Annual revenues and costs:

The new piece of equipment mentioned above has a useful life of $4$ years and will be written of over $4$ years. At the end of $5-$years the equipment will be converted to $$10000$ cash as scrap value.

The old piece of equipment mentioned in the table above would be sold at the beginning of the project and there would be no gain or loss realized on its sale. Matacho SA$($Ltd$)$ uses the straight$-$line depreciation method for financial reporting and tax purposes.

The company$$s tax rate is $30\%$ and it$$s after tax cost of capital is $16\%.$

When the project concludes in five years, the working capital will be released.