Question
Canggih Sdn. Bhd. is considering a new product.The company currently manufactures several lines of school uniform.The new product, Canggih Jean, is expected to generate sales
Canggih Sdn. Bhd. is considering a new product.The company currently manufactures several lines of school uniform.The new product, Canggih Jean, is expected to generate sales of RM1.0 million per year for the next 5 years.They expected that during this five-year period, they will lose about RM250000 in sales of existing line of jean.The new line will require no additional equipment or space in the plant and can be produced in the same manner as the apparel products.The new project will, however, require that the company spend an additional RM80000 per year on insurance for raw materials.Also an additional marketing manager would be hired to oversee the line at a salary of RM45000 per year in salary and benefits, in additional to the current manager who is earning RM60000 per year in salary and benefits. Depreciation of RM100000 of existing plant and machinery is expected to remain the same.
If the marginal tax rate is 28%, compute the incremental after tax cash flow for years 1-5.
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