XYZ It is considering the possibility of manufacturing a particular component which at present is being bought from outside. The manufacture of the component would call for an investment of R 7,50,000 in a new machine besides an additional investment of R50,000 in working Capital. The life of the machine would be 10 Years, with a salvage value of 750,000. The estimated savings (before tax) would be 1,80,000 per annum. The Income tax rate is 50%. The company's required rate of return is 10%. Depreciation is provided on straight line basis.

Suggest the firm whether this investment to be made or not. Show your detailed workings.