A weight-sorting machine with a sorting capacity of 4,000 units/month was purchased 4 years ago at a cost of RM150,000. Business has been very good and the demand has increased over the past 4 years. In order to keep up with the increasing demand, the machine needs to be upgraded so that it can sort the finished products based on weights as well as colours. This upgrade will provide additional capacity of 2,000 units/month but it will cost the company RM50,000 to upgrade and RM5,000 to maintain the machine at the end of the first year after the upgrade, then increasing by RM500 every year until the machine is scrapped after 6 years. Since the machine is quite dated, a supplier is suggesting that the company should consider buying a totally new sorting machine with the capability to sort not only based on weight and colour, but also based on the shape of the products. This RM200,000 new machine has more capacity than the upgraded machine's capacity by an additional 100% and an annual maintenance cost of RM2,500. The new machine is expected to last for 10 years, after which it can be sold for RM30,000. Assume one unit of the product is sold at RM0.40 and depreciation deductions of both machines are negligible. If MARR is 20%, what is the minimum market value of the new machine at the end of 6 years so that the new machine is the better choice? Draw the complete cashflow diagrams for both machines. A weight-sorting machine with a sorting capacity of 4,000 units/month was purchased 4 years ago at a cost of RM150,000. Business has been very good and the demand has increased over the past 4 years. In order to keep up with the increasing demand, the machine needs to be upgraded so that it can sort the finished products based on weights as well as colours. This upgrade will provide additional capacity of 2,000 units/month but it will cost the company RM50,000 to upgrade and RM5,000 to maintain the machine at the end of the first year after the upgrade, then increasing by RM500 every year until the machine is scrapped after 6 years. Since the machine is quite dated, a supplier is suggesting that the company should consider buying a totally new sorting machine with the capability to sort not only based on weight and colour, but also based on the shape of the products. This RM200,000 new machine has more capacity than the upgraded machine's capacity by an additional 100% and an annual maintenance cost of RM2,500. The new machine is expected to last for 10 years, after which it can be sold for RM30,000. Assume one unit of the product is sold at RM0.40 and depreciation deductions of both machines are negligible. If MARR is 20%, what is the minimum market value of the new machine at the end of 6 years so that the new machine is the better choice? Draw the complete cashflow diagrams for both machines
