ZAR $Sd.Bhd.is$ considering the purchase $of$ a packaging machine. The purchase price $of$ the machine $isRM80,000,$ plus $an$ additional $RM1,500to$ ship and $RM25,000to$ install. The new machine will have $a5-$year useful life and will $be$ depreciated using the $3-$year MACRS class $(Depreciationin$ Year $1-33\%$; Year $2-45\%$; Year $3-15\%$; and, Year $4-7\%on$ costs$).$

The machine $is$ expected $to$ generate new sales $ofRM40,000$ per year and $is$ expected $to$ save $RM15,000$ per year $on$ labour expenses over the next $5$ years. However, the production costs will also $goupbyRM3,000$ every year. Upon buying the machine, $it$ requires inventories $to$ increase $byRM20,000$ and accounts payable increase $byRM10,000.$ The change $in$ Net Operating Working Capital $is$ expected $tobe$ fully recovered $at$ year $5.$ The machine $is$ expected $to$ have a disposal value $ofRM30,000.$ ZAR $Sdn.Bhd.$ uses $a12\%$ discount rate for capital budgeting purposes and the firm's income tax rate $is40\%.$

REQUIRED:

$a.$ Should ZAR proceed with the new project?

$b.$ Using the Payback Period Method and Discounted Payback Period Method, calculate the number $of$ years needed $to$ recover the initial cash outlay.

$c.$ Explain relevant and irrelevant cash flow $by$ giving $2$ examples respectively.