The management of Fine Electronics Company is considering purchasing an equipment to be attached with the main manufacturing machine. The equipment will cost Rs.6000 and will increase annual cash inflow by Rs.2200. The useful life of the equipment is 6 years. After 6 years it will have no salvage value. The management wants a 20% return on all investments. You need to calculate PVF or PVFA values using calculator.

Required:

A) Compute net present value (NPV) of this investment project.

B) Should the equipment be purchased according to NPV analysis?

[5 marks]