New$-$worn Pte Ltd$,$ a textile recycling firm, has been in business for $20$ years. It

is contemplating purchasing new machines to replace existing ones. In order to

determine the feasibility of incorporating the new machines into its current

production process, New$-$worn had previously paid $$6000$ to commission a study

for this exercise.

The new machines are expected to cost $$340000,$ with an additional $$10000$ for

installation expense. The after$-$tax proceeds from disposing off existing

machines is expected to amount to $$45000.$ Current assets will increase by

$$5000,$ and current liabilities will increase by $$3000.$

The revenues and expenses $($excluding depreciation and interest$)$ associated with

the existing machines for the next four years are given in the table below.

The company has a cost of capital of $8\%$ per annum.

a$)$ Determine the initial investment associated with the purchase of the new

machines.

b$)$ It is projected that the new machines will increase revenue by $25\%,$ and

increases expenses by $10\%$ respectively. Calculate the following:

i$.$ Operating cash inflows for the existing machines.

ii$.$ Operating cash inflows for the new machines.

iii. Incremental cash flows for this project.

c$)$ Calculate the Net Present Value $($NPV$)$ for this project.

d$)$ Should New$-$worn purchase the new machines, or continue with the

existing machines? Explain.