PGR Berhad, a manufacturer of plastic products, is considering replacing a 5 year old manual moulding machine with a new automated machine. The replacement can save production costs by RM51,000 per year. The present and the expected situation resulting from the replacement are given below: Present Machine New Machine Total expected useful life 10 years 5 years Cost of machine RM100,000 RM145,000 Expected resale value 5 years from now RMO RM37,000 Resale value now RM12,500 Depreciation charge per year (straight - line method) RM10,000 RM29,000 Investment tax credit 10% on cost The company's tax rate is 40% and tax is paid in the year it is incurred. The capital allowance is equal to the depreciation charged. Investment tax credit is claimed in the year of investment. a. Calculate the cash flows if the machine is replaced. b. If the rate of return is 12%, calculate the following: i. Payback period. 1i. Net present value. iii. Profitability index. iv. Internal rate of return. C. Explain whether the company should replace the machine