The directors of Garion Berhad is considering the purchase of a new machine $($MASII$)$ to replace an existing machine $($MAS I$)$ in order to reduce operating costs.The new machinery would produce goods more efficiently, leading to increased sales volume. The investment required will be RM$1,540,000$ payable at the start of the project. The alternative course of action would be to continue using existing machinery for a further five years, at the end of which time it would be replaced. The following forecasts of sales and production volumes have been made:

Sales $($in units$)$ Year

Using existing machinery

Using new machinery

$1450,000660,000$

$2480,000690,000$

$3510,000720,000$

$4620,000860,000$

$5790,0001,080,000$

Production $($in units$)$

Year Using existing

machinery Using new machinery

$1460,000575,000$

$2490,000657,000$

$3525,000700,000$

$4650,000880,000$

$5800,0001,044,000$

a$)$ The new machinery will reduce production costs from their present level of RM$8\mathrm{.}10$ per unit to RM$6\mathrm{.}10$ per unit. These production costs exclude depreciation.

b$)$ The increased sales volume will be achieved by reducing unit selling prices from their present level of RM$11\mathrm{.}00$ per unit to RM$9\mathrm{.}50$ per unit.

c$)$ The new machinery will have a scrap value of RM$200,000$ after five years.

d$)$ The existing machinery will have a scrap value of RM$50,000$ at the start of Year $1.$ Its scrap value will be RM$30,000$ at the end of year $5.$

e$)$ The cost of capital to the company, in money terms, is presently $15\%$ per annum.

Required:

$1.$ Prepare a financial analysis to report whether the new machinery should be purchased.

$2.$ When management is considering purchasing new machinery in circumstances such as

what non$-$financial factors should they consider