Question 3		6 marks
You would like to purchase a machine to replace an existing one.
Details of this potential transaction are as follows:
New machine
Cost					2,800,000.00
Initial setup costs				30,000.00
Expected reduction in maintenance, annually		525,000.00
Expected reduction in repair costs, annually		25,000.00
Expected increase in depreciation expenses, annually		33,000.00
Useful life					8 years
Salvage value at the end of useful life			50,000.00
Current machine
Estimated current selling price			70,000.00
Current net book value				160,000.00
Remaining useful life				8 years
Salvage value at the end of useful life			-
You require an 12% return on inventory for all projects. Ignore tax implications.
Perform a capital budgeting analysis of the new machine.