** PLEASE ANSWER WITHOUT USING EXCEL AND SHOW ALL WORKINGS

ABC Co. a publicly listed company is considering purchasing a new manufacturing machine costing $2.5 million. The manufacturing machine would last for four years. At the end of the fourth year the manufacturing machine would require replacing and the company expects to receive scrap value equal to 5% of the initial cost of the machine. Tax-allowable depreciation on a 25% reducing balance basis would be available on the cost of the machine. The resulting balancing charge or balancing allowance can be claimed in the final year of operation. The manufacturing machine will produce 4,500 units per annum. All of the units produced annually are expected to be sold. Financial information quoted in current price terms is as follows: Forecast inflation Selling price per unit: $325 2.0% per year Variable cost per unit: $125 2.75% per year Incremental fixed costs: $125,000 2.5% per year ABC Co. will require an initial investment in working capital of $250,000. Investment in working capital will be subject to inflation at a rate of 2.35% per annum. ABC Co. is required to pay taxation on their profits at a rate of 10% per annum, one year in arrears. ABC Co. has a nominal (money terms) after-tax weighted average cost of capital of 6% per annum, Please note: Present values tables are provided in Appendix A. Required: (i) Utilizing a nominal (money terms) approach calculate the net present value (NPV) of the planned purchase of the new manufacturing machine. Show your workings. [12 marks] (ii) Comment on whether the financial manager should invest in the new manufacturing machine. [3 marks]