Al-Khir Sdn Bhd is considering to replace one of its old machines with a fully automated machine. The present machine generate sales revenue of RM2 million annually. The annual overhead expenses and costs of defects were RM500,000 and RM125,000 annually. The old machine was bought 3 years ago for RM900,000 with the useful life of 10 years and salvage value of RM100,000. The current market value of the machine today is RM880,000. The purchase price of the new machine is RM2 million excluding custom duty, transportation and insurance at RM60,000, RM20,000 and RM10,000 respectively. The new machine is expected to generate sales revenue of RM2.7 million with an annual overhead expenses of RM800,000 and costs of defects per year of RM35,000. It will depreciate over 7 years with a salvage value of RM250,000 at the end of its useful life. The new machine will require an additional RM210,000 inventory. Last year the company spent RM33,000 training their workers. The company uses straight line method in depreciating its fixed assets. The desired payback period is 3 years. The corporate tax is 25% and the cost of capital is 20%. (Calculate the answers to the nearest Ringgit) Required: a b. Calculate the followings: i Initial outlay ii. Annual cash flow iii. Terminal cash flow (11 marks) Compute the followings: i. Payback period ii. Net present value iii. Internal Rate of Return (IRR) (11 marks) Justify whether the company should or should not replace the existing machine. (3 marks) (Total: 25 marks) C