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A. Sanggul Berhad is considering purchasing a new printing machine to replace an old machine. The useful life of the new machine is 6 years.
A. Sanggul Berhad is considering purchasing a new printing machine to replace an old machine. The useful life of the new machine is 6 years. The machine purchase price is RM350,000. Installation charges of RM130,000 would be needed to put the machine into operating condition. The accountant has made the analysis of the project and the results of the analysis are as follows: a. Initial outlay - RM331,000 b. Differential cash inflows: Year 1- 4 Year 5 - 6 RM109,000 RM 67,580 c. Terminal cash flows RM30,000 The company requires a minimum rate of return of 12% and is subject to a corporate tax rate is 24%. All assets are depreciated on a straight-line basis. The firms maximum payback period is 4 years for all its investment. Required: a. Calculate the following: i. Payback Period ii. Net Present Value iii. Internal Rate of Return (IRR) iv. Profitability Index (Note: All calculations are to be made to the nearest RM) (15
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