Moodle x x 1 Not yet arowered Finish attempt Marked out of 20.00 Time left 3:37:17 Seruling Sdn. Bhd. is considering replacing its two old food trucks with two new fleets of moder-equipped trucks. Currently, Seruling Sdn. Bhd.'s trucks which cater around university and office areas are generating annual revenues of RM1,500,000. However, with the current trucks, Seruling Sdn. Bhd.'s food truck business is facing limited capacity to accommodate additional staff in the truck to cook and to service the rising customers' demand. Serkam Auto, which specialises in modifying and selling food trucks, is willing to sell its moder-equipped food truck to Seruling Sdn. Bhd. at RM200,000 per truck. At the same time, Seruling Sdn. Bhd. is able to trade in both the old food trucks to Serkam Auto for a total of RM230,000. The new food trucks will be depreciated using the straight-line method over useful life of 8 years. One of the old trucks was bought 6 years ago at RM180,000 when Seruling Sdn. Bhd. started the business, while the second truck was bought 3 years ago at RM 190,000. Both old trucks were being depreciated using the straight-line method over an estimated useful life of 8 years. If the old trucks are not replaced today, it can still be used for another 5 more years before being disposed at RM20,000 per truck, Seruling Sdn. Bhd. hopes to sell off its food truck business in 5 years time to start a chain of restaurants. The salvage value of the new food truck is estimated to be RM70,000 per truck in 5 years time, If the old food trucks are replaced today, it is estimated that this will help to increase the company's revenue by RM300,000 per annum. Meanwhile, this would also lead to some changes in its operating costs as per the table below: Operating costs per truck Old Trucks New Trucks Salary RM50,000 RM80,000 Fuel Costs RM5,000 RM4,500 Service and repair costs RM3,000 RM1.500 on it is estimated that the company's inventory would need to be increated to M5.000 of the But today. At the end of 50 percent of this is avail salvage value of the new food truck is estimated to be RM70,000 per truck in 5 years time If the old food trucks are replaced today, it is estimated that this will help to increase the company's revenue by RM300,000 per annum. Meanwhile, this would also lead to some changes in its operating costs as per the table below: Operating costs per truck Old Trucks New Trucks RM50,000 RM80,000 Salary Fuel Costs RM5,000 RM4,500 Service and repair costs RM3,000 RM1,500 In addition, it is estimated that the company's inventory would need to be increased by RM5,000 if the new trucks were bought today. At the end of year 5,50 per cent of this amount is recoverable. The company's debt to equity ratio is 0.25 while its cost of equity and cost of debt are estimated to be around 11.5% and 8,5% per annum respectively. The tax rate is 30% Required: (a) Calculate the company's weighted average cost of capital. 13 marks 1 (b) Calculate the relevant present value of cash flows (on a net present value basis to determine whether Seruling Sdn Bhd should replace the old trucks? [ 17 marks) Maximum size for new Tiles IGE