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Please help to do this question as many you can do in the limited time. Thank you, appreciate. (2). The Lambton Engineering Company (LEC) plans
Please help to do this question as many you can do in the limited time. Thank you, appreciate.
(2). The Lambton Engineering Company (LEC) plans to purchase a new production machine for RM 25,000. It will cost RM 2,000 to have the new machine installed and LEC expects RM 1,000 net increase in working capital. By making the investment, LEC will reduce its annual operating costs by RM 7,000 and expects to save RM 500 a year in maintenance. The new machine will require RM 750 each year for technical support. LEC will depreciate the machine over 5 years using the straight-line method of depreciation with an expected salvage value of RM 5,000. Tax rate is 35%. As an engineering student with finance knowledge in project investment, you are requested to assist this company according to the following scenarios: (a). Before deciding on this investment, what are the relevant changes or differences to cash flow once LEC invests in the project? (b). Based on the above information, calculate the relevant cash flow and terminal cash flow for this project. (C). The Lambton Engineering Company uses a discount rate of 12%. Discount rate or discount factor for 5 years' duration is given in the following table. Calculate the net present value of this project based on its two cash flow types and evaluate if the project can be accepted. Table 1: Discount Rate Jadual 1: Kadar Diskaun Year/tahun (n): 1 2 3 4 5 Present Value of Nilai Kini RM 1.00, year/tahun = n, rate/kadar=k k=10% k=11% k=12% 0.909 0.901 0.893 0.826 0.812 0.797 0.751 0.731 0.712 0.683 0.659 0.636 0.621 0.593 0.567 (d). The tax rate of LEC is 35%. LEC expects that an existing machine can be sold for RM 6,000. Calculate the net investment of LEC. (e). The Lambton Engineering Company is deciding whether to repair an old delivery truck now or purchase a new one. The company uses a discount rate of 10% for this case. By referring to Table 1 and the following information, calculate their Net Present Values and evaluate these decision alternatives. RM OLD TRUCK TRAK LAMA Current repair cost /Kos membaiki semasa Annual operating costs/Kos pengoperasian tahunan Salvage value in 5 years/Nilai sisaan dalam 5 tahun Current salvage value/Nilai sisaan semasa 4,500 10,000 250 9,000 NEW TRUCK TRAK BAHARU Purchase pricel Harga belian Annual operating costs/Kos pengoperasian tahunan Salvage value in 5 years/Nilai sisaan dalam 5 tahun RM 21,000 6,000 3,000 (2). The Lambton Engineering Company (LEC) plans to purchase a new production machine for RM 25,000. It will cost RM 2,000 to have the new machine installed and LEC expects RM 1,000 net increase in working capital. By making the investment, LEC will reduce its annual operating costs by RM 7,000 and expects to save RM 500 a year in maintenance. The new machine will require RM 750 each year for technical support. LEC will depreciate the machine over 5 years using the straight-line method of depreciation with an expected salvage value of RM 5,000. Tax rate is 35%. As an engineering student with finance knowledge in project investment, you are requested to assist this company according to the following scenarios: (a). Before deciding on this investment, what are the relevant changes or differences to cash flow once LEC invests in the project? (b). Based on the above information, calculate the relevant cash flow and terminal cash flow for this project. (C). The Lambton Engineering Company uses a discount rate of 12%. Discount rate or discount factor for 5 years' duration is given in the following table. Calculate the net present value of this project based on its two cash flow types and evaluate if the project can be accepted. Table 1: Discount Rate Jadual 1: Kadar Diskaun Year/tahun (n): 1 2 3 4 5 Present Value of Nilai Kini RM 1.00, year/tahun = n, rate/kadar=k k=10% k=11% k=12% 0.909 0.901 0.893 0.826 0.812 0.797 0.751 0.731 0.712 0.683 0.659 0.636 0.621 0.593 0.567 (d). The tax rate of LEC is 35%. LEC expects that an existing machine can be sold for RM 6,000. Calculate the net investment of LEC. (e). The Lambton Engineering Company is deciding whether to repair an old delivery truck now or purchase a new one. The company uses a discount rate of 10% for this case. By referring to Table 1 and the following information, calculate their Net Present Values and evaluate these decision alternatives. RM OLD TRUCK TRAK LAMA Current repair cost /Kos membaiki semasa Annual operating costs/Kos pengoperasian tahunan Salvage value in 5 years/Nilai sisaan dalam 5 tahun Current salvage value/Nilai sisaan semasa 4,500 10,000 250 9,000 NEW TRUCK TRAK BAHARU Purchase pricel Harga belian Annual operating costs/Kos pengoperasian tahunan Salvage value in 5 years/Nilai sisaan dalam 5 tahun RM 21,000 6,000 3,000Step by Step Solution
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