ABC Manufacturing Sdn$.$ Bhd$.($ ABC $)$ is a Malaysian manufacturing company specialising in the

production of advanced solar panels. ABC is currently evaluating a new project called "SolarEco". It

is a four$-$year project which involves the expansion of its solar panel production facilities. To initiate

SolarEco, ABC needs to allocate RM$2,500,000$ for machinery acquisition immediately and it is

expected that the machinery does not have any scrap value at the end of the fourth year.

The expected selling price of each SolarEco Panel is RM$200$ at the current price level and the variable

cost per unit is RM$120$ at the current price level. ABC is expecting to sell the following number of

units each year:

Year $1$: $10,000$ units

Year $2$: $15,000$ units

Year $3$: $20,000$ units

Year $4$: $25,000$ units

ABC has also anticipated that both the selling price and variable cost will increase annually by $5\%$ to

account for inflation. The fixed cost per year is RM$300,000$ at the current price level and will increase

annually by $10\%$ to account for inflation.

In addition, if ABC initiates this project, an old machine will be sold immediately at RM$500,000.$ The

discount rate used for the project is the after$-$tax nominal cost of capital for ABC, which stands at

$12\%.$ABC is subject to a corporation tax rate of $25\%$ per annum, payable one year in arrears.

Depreciation for the new machinery is calculated using the straight$-$line method over the project's life.

Working capital of RMB$00,000$ will be required at the start of the investment project and will be

recoverable at the end of the project.

Required:

$($a$)$ Calculate the Net Present Value of the new project.

$($b$)$ Calculate the payback period of the new project.

$(3$ marks$)$

$($c$)$ Advise ABC on TWO $(2)$ non$-$financial factors that should be considered before making the

final decision on the new project.

$(6$ marks$)$

$[$Total: $25$ marks$]$