QUESTION TWO $[25]$B$.$ Investment in a new machinePfeka Garments South Africa Limited $($PGSA$)$ is evaluating an investment in automatedcutting machines aimed at improving efficiency and reducing labor costs. This decisioninvolves significant capital expenditure and will lead to workforce reductions. Thecompany plans to acquire cutting machines from a German supplier for a total cost,converted to South African Rand, of R$15435000($$$900,000$ at an exchange rate ofR$17\mathrm{.}15$ per $$1).$Zandile, the Financial Director, provided the following financial details for the project asat $31$ December $2023$:Financial Details: Research CostsPGSA has already invested R$315,000$ in preliminary research to identify the mostsuitable automated cutting technology and supplier. Training CostsAn allocation of R$380,000$ will be used in January $2024$ for training the currentemployees to operate the new automated machines, ensuring they are proficient inthe new technology. Severance PaymentsTo manage the transition due to automation, PGSA will provide severance paymentstotaling R$240,000$ to the retrenched employees at the start of the project, helpingthem during their transition period. Additional Research and Travel CostsAn additional R$200,000$ is anticipated for further detailed research and travel beforefinalizing the purchase, including visits to the machine supplier in Germany. Operating CostsThe annual operating costs for the new machines, including maintenance, materials,and necessary staffing, are projected to be R$6,000,000$ from $2024$ to $2026$ and $6400000$ in $2027.$ Projected Annual Turnover:Starting with a base revenue of R$30,000,000$ in $2024,$ the turnover is expected togrow by $5\%$ in $2025,5\%$ in $2026,$ and $6\%$ in $2027.$ These growth rates are based onthe increased efficiency and production capabilities provided by the automatedmachines. Estimated Resale ValueThe machine has a useful life of $4$ years and will be depreciated on a straight$-$linebasis. After four years of operation, the automated cutting machines are expected toretain a resale value of about $25\%$ of their initial purchase cost. This residual valuewill help offset some of the initial capital expenditure.RequiredB. With reference to part B$.$ Investment in a new machine:$2\mathrm{.}1$ Using the Net Present Value $($NPV$)$ method, advise management on whether theyshould go ahead with the investment or not. Give reasons for any amount excluded$(20)$Note: PGSA uses a $12\%$ discount rate.Ignore Taxation$2\mathrm{.}2$ List five $(5)$ qualitative factors that management should consider before investing inthe machine.