oen 88- 073 Question 2 40 marks ABC Company is considering in purchasing a new machine for its factory at a cost of $1,600,000. The new machinery will boost output and increase sales by $300,000 per year. It will also increase the raw material inventory carried by $40,000 to support the higher production. The additional inventory will not be needed in the last year of operations when it will be released. In year 3, the machinery will be overhauled at a cost of $40,000. The new machine will also reduce operating cost by $10,000 per year over its useful life. The new machine's useful life is expected to be 5 years at the end of which it can be sold for $10,000. ABC's cost of capital for evaluating capital projects is 11 %. Required: Prepare an analysis for management showing the projects profitability. Do you recommend that the investment be made