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c) FINTECH Bhd. is considering a new automatic surveillance system to replace its current contract security system. It will cost RM450,000 to get the new
c) FINTECH Bhd. is considering a new automatic surveillance system to replace its current contract security system. It will cost RM450,000 to get the new system. The cost will be depreciated straight-line to zero over the system's four-year expected life. The system is expected to be worth RM250,000 at the end of four years after removal costs. No additional working capital is required in this four year. The new system will save the company RM125,000 per year before taxes in contract security costs. The tax rate is 21 percent. Calculate the NPV for buying the new system if the required return is 15 percent. Should FINTECH invest in this system? (12 marks) d) Identify the weaknesses of the payback period method. (8 marks)
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