Answered step by step
Verified Expert Solution
Question
1 Approved Answer
MBOX Bhd. is a manufacturer of automobile parts specialising in steering and suspension components. Due to increasing demand in emerging markets worldwide, the management of
MBOX Bhd. is a manufacturer of automobile parts specialising in steering and suspension components. Due to increasing demand in emerging markets worldwide, the management of MBOX Bhd. is considering replacing its manually operated machine with a new automated machine. Although the existing unit has 5 more years of service life, its operating costs are fairly high compared to its revenues. The new automated machine costs RM2,000,000. An additional RM200,000 is needed for transportation and installation cost. The new machine is expected to generate incremental revenues of RM2,000,000 per annum with an incremental overhead cost of RM700,000 per year. It will be depreciated over 5 years and the scrap value of machine is RM200,000. The firm's cost of capital is 12%. Required: (a) Calculate the Net Present Value (N.P.V.) of the new machine. (7 marks) (b) Calculate discounted payback period of the new machine. (3 marks) Calculate Modified Internal Rate of Return for the new machine. (7 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started