Question $9$

Garuda, Ltd$.$ intends to buy a new machine for the production of card boxes. The machine costs $$1,000,000$ and can be used for $20$ years, at which time it will become worthless. Garuda plans to upgrade to a new model in $10$ years when it will be sold for $$400,000.$ Sales revenues from the machine are expected to be $$300,000$ per year for the first four years of use and $$250,000$ in Year $5.$ The company uses the straightline depreciation method for its non$-$current assets and requires the investment to be paid back within three years. Garuda's cost of capital is $15\%.$

Required:

a$)$ Calculate the Accounting Rate of Return $($ARR$).$

b$)$ Calculate the Payback Period $($PP$).$

c$)$ Calculate the Net Present Value $($NPV$).$

d$)$ Should Garuda accept this project or not? Explain.