A. PENDING Bhd is considering expanding their project and replacing its existing machine with a new machine from German. The company intends to replace its AA3 machine with the new model AH5. The companys current annual sales are RM1,960,000. To buy this machine, PENDING Bhd plans to take a long-term loan of RM1,300,000 and 5% interest will be paid annually. The balance will be financed by retained earnings. Non-current assets are depreciated using straight-line basis. Corporate tax rate is 24% and the firms cost of capital is 10%. The desired payback period is 5 years. The existing machine was bought four years ago for RM1,200,000 with an expected useful life of 9 years. Its expected salvage value is RM120,000 and it can be sold today for RM750,000. The machine is currently handled by three operators, each earning RM36,000 per year. The annual maintenance cost is RM100,000. The price of the new machine is RM1,560,000 (excluding of transportation, insurance during transit and installation charges of RM100,000, RM140,000 and RM160,000, respectively). As part of the evaluation, the company paid a consulting firm RM50,000 to perform a test on marketing analysis. This new machine will increase the annual sales by 15% for the first two years and increase by RM350,000 in the remaining years. The annual maintenance cost is reduced to RM52,000. The use of the new machine will increase the firms inventory by RM250,000 and an additional of short-term borrowings worth RM140,000 is required. Only one operator is required to handle the new machine. The service of the other two existing operators will be terminated and a compensation of RM20,000 will be paid to each of them immediately. This new machine has a useful life of 6 years and no salvage value was assigned to this machine. Note: Ignore inflation and taxation effect