financial management

Question 1 Emerald Green Berhad bought a machine 6 years ago hoping it would serve its needs for 10 years. The existing machine has a book value of RM60,000 and is being depreciated at RM15,000 a year toward a zero-salvage value in 4 years. However, today the machine can be sold for only RM65,000. The appeal of the new machine is that it is completely automated, thus requires fewer employees whose combined salaries total RM90,000 per year. The machine is expected to increase production and revenues from RM50,000 per year to RM200,000. The useful life of the new machine is 6 years and depreciation using straight line method. However, the sophisticated feature comes at the cost of higher maintenance of RM120,000 compared to only RM80,000 for the older machine. The new machine being considered costs RM230,000 to purchase, plus an additional RM10,000 in shipping and installation costs. Last year, the company also spent RM3,000 to send a staff for training on the new machine. The new machine has an expected disposal value of RM70,000 in 6 years. The required rate of return is 10% Required: a) Calculate the initial cash outflow associated with replacing the older machine with the new machine. (4 Marks) b) Calculate the Net Present Value if the company decided to buy the new printing machine. (8 Marks) (2 Marks) c) Should the company proceed with buying the new machine? (Total: 14 Marks)