Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Of Capital Applications And Examples

Authors: Shannon P. Pratt, Roger J. Grabowski, Richard A. Brealey

5th Edition

1118555805, 9781118555804

More Books

Students also viewed these Finance questions