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ABC company is planning to purchase a machine to increase its current production. The machine costs RM2,575,000, and 30% of the purchase price can be
ABC company is planning to purchase a machine to increase its current production. The machine costs RM2,575,000, and 30% of the purchase price can be recovered in year 5. The expected operating cash flow (OCF) of the machine is as follows:
Year | OCF (RM) |
1 | 1,825,000 |
2 | 2,775,000 |
3 | 1,630,000 |
4 | 1,235,000 |
5 | 1,200,000 |
The companys cost of capital is 5.82%. Assess the viability of the purchase based on Capital Budgeting Techniques.
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