_. :1'asm x e FinaiEx. x u FINALE x | I! chapter it | 6 ch. 1m x\" " WOExartEZOPAM 303396 20-%ZOSEMA1 92%20-%2059t%201 -%20Complete.pdf If the new machine is used. the annual sates will increase by RM15.000.00. The maintenance and defects of the new machine would be RM3.000.00 and RMSODDO respectively. The new machine also requires properly trained maintenance workers to handle it. Fortunately. a similar machine was bought six months ago. and the maintenance workers had gone through the RM5.000.00 training program needed to familiarize themselves with the new machine. Encik Muzammil is not certain whether to charge half of this RM5,000.00 training charges towards the new proposed project Finally, to purchase the new machine, the company needs to borrow a ve-year RM60,000.00 loan. from a local bank. This will result in additional interest payment of RM5.000.00 per year. The company tax rate is 23% and the cost of capital is 15%. The company uses straight-line method to depreciate all of its xed assets. REQUIRED: a. Compute: (i) Initial outlay (ii) Differential cash flows (iii) Terminal cash flows no marks] [See next page PAM3033 : Management Accounting it 4 b. Using your answer in (a), compute: {i} The payback period (ii) The net present value (iii) Internal rate of return IvI- 4:. Should Enclk Muzammll replace the existing machine? Explain. __________._ OUESTION 2 (20 Marks) Encik Muzammil. a management accountant of a manufacturing company located in Kulim Hi- Tech Area, Kedah is considering purchasing fully automated machine to replace an older, semi manual operated machine. The old machine was bought for RM55,000.00 five years ago. It has a remaining useful life of ve years with zero salvage value. The machine can now be sold for RM17,000.00. The company employs a worker to operate the machine and pays him a salary of The annual cost of maintenance and RM13.000.00 and fringe benets RM2.500.00 per year. defects associated with the old-time machine are RM5.200.00 and RM2.600.00 respectively. 0, with a salvage value of RM15,000.00 at the end of its The new machine will cost RM75,000.0 0 and installation cost of ve years expected useful life. Transportation charges of RM3.000.0 RM2.000.00 will have to be paid. In addition, since the machine is more efcient, the company needs to buy additional raw materials amounting to RM5,000.00. It will still require an operator to operate it. if the new machine is used, the annual sales will increase by RM15,000.00. The maintenance and defects of the new machine would be RM3,000.00 and RM500.00 respectively. The new machine also requires properly trained maintenance workers to handle it. Fortunately, a similar machine was bought six months ago, and the maintenance workers had gone through the RM5,000.00 training program needed to familiarize themselves with the new machine. Encik Muzammil is not certain whether to charge half of this RM5,000.00 training charges towards the new proposed project. Finally, to purchase the new machine, the company needs to borrow a five-year RM60.000.00 loan, from a local bank. This will result in additional interest payment of RM5,000.00 per year. The company tax rate is 23% and the cost of capital is 15%. The company uses straight-line method to depreciate all of its xed assets. REQUIRED: a. Compute: (1} initial outlay (ii) Differential cash ows (iii) Terminal cash flows [10 marks] [See nextpage