A firm is considering purchasing two assets. Asset A will have a useful life of 15 years and cost RM3 million; it will have installation costs of RM400,000 but no salvage or residual value. Asset B will have a useful life of 6 years and cost RM1.3 million; it will have installation costs of RM180,000 and a salvage or residual value of RM300,000. Which asset will have a greater annual straight-line depreciation?

 ABC company is considering replacing an old machine with a new one. Two months ago their chief engineer completed a training seminar on the new machine's operation and efficiency. The RM4,000 cost for this training session has already been paid. If the new machine is purchased, it would require RM5,000 in installation and modification costs to make it suitable for operation in the factory. The old machine originally cost RM90,000 five years ago and is being depreciated by RM15,000 per year. The new machine will cost RM80,000 before installation and modification. It will be depreciated by RM5,000 per year. The old machine can be sold today for RM10,000. The marginal tax rate for the firm is 40%. Compute the relevant initial outlay in this capital budgeting decision.

9. DEF Corporation is considering a new product line. The company currently manufactures several lines of snow skiing apparel. The new products, insulated ski jacket, are expected to generate sales of RM1 million per year for the next five years. They expect that during this five-year period, they will lose about RM250,000 in sales on their existing lines of longer ski sweater. The new line will require no additional equipment or space in the plant and can be produced in the same manner as the apparel products. The new project will, however, require that the company spend an additional RM80,000 per year on insurance in case customers sue for frostbite. Also, a new marketing director would be hired to oversee the line at RM45,000 per year in salary and benefits. Because of the different construction of the jacket, an increase in inventory of 3,800 would be required initially. If the marginal tax rate is 30%, compute the incremental after-tax cash flows for years 1-5.