PLK Co is considering investing in new machinery as part of a launch of a new product, 'Quago'. The new machine is expected to have a useful life of four years and could be bought for GHS1,000,000, half of which would be paid immediately with the rest payable in a year's time. The scrap value of the machine after four years would be GHS30,000. The machine will be sold in the year following the end of the project.

Demand for the product in each of the four years is expected to be as follows:

Year 1 2 3 4

Production and sales (units/year) 35,000 53,000 75,000 36,000

The selling price of product P (in current price terms) will be GHS30 per unit. The variable cost of the product (in current price terms) will be GHS16 per unit. Selling price inflation is expected to be 3% per year and variable cost inflation is expected to be 5% per year. Fixed costs (in current price terms) relating to the project will be GHS10 per unit in the first year. The fixed cost is expected to remain unchanged throughout the project, and no inflation is expected.