Vendi is considering buying a new machine which would have a useful economic life of five years, a cost of 1.5 million and a scrap value of 300,000, with 60% of the cost being payable at the start of the project and the rest after one year, at end of year 1. The machine would produce 500,000 units per year of a new product with an estimated selling price of 4 per unit. Direct costs would be 1.5 per unit and annual fixed costs, including depreciation calculated on a straight-line basis , would be 500,000 per annum. In years 1 and 2, special marketing expenditure, not included in the above costs, would be incurred, amounting to 50,000 split equally between the first two years.

Required: (d) Evaluate the investment using the NPV investment appraisal method and the companys newly calculated cost of capital.