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Q1 UTeM Sdn Bhd is considering purchasing a new machine to improve one of its current production lines. Two types of machines are available
Q1 UTeM Sdn Bhd is considering purchasing a new machine to improve one of its current production lines. Two types of machines are available on the market. The lifespan of the machines Alpha and Gamma is different, but the company plans only to use the service of either machine not more than six years. The cost elements of both machines are listed in Table A below. The company always has another option: leasing a machine at RM3,000 per year which is fully maintained by the leasing company. (a) Suggest TWO (2) decisions alternatives to the company. (4 marks) (b) Develop the cash flow diagram for the above alternatives. Table A: Machine Information Item First Cost, RM Machine Alpha Machine Gamma 6,500 8,500 Annual Operating Cost, 800 520 RM Change Filter Useful Life, years Salvage Value, RM 200 every year 350 every 2 years 3 6 600 1,000 (6 marks)
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