PT Krakatau Steel has a steel making machine. To increase its production capacity, PT Krakatau Steel plans to buy a new machine at a price of IDR 10 billion and an installation of IDR 500 million. This machine has a lifespan 5 years of economic life, 10% residual value, with the hope that the machine can still be sold at a price of Rp. 500 million in when its economic life is up. It is projected that this new machine will increase sales levels to IDR 3 billion per year. Operational Costs that must be borne by the Company are variable costs 40% of sales and a fixed fee of IDR 300 million (including a depreciation fee of IDR 100 million) million. The current tax rate is 20% and the desired rate of return is 25% pa.

a) Analyze whether PT Krakatau Steel's plan to purchase this machine is feasible. Use Discounted Payback Period and Net Present Value?

b) Explain the importance of capital budgeting analysis in the company?