Q2(a) Globe Engineering SDN. BHD. is evaluating a new Water Sprinkle System offered by two companies. Table Q2(a) shows the list of proposals. Select the preferred proposal based on incremental analysis annual worth, AW if the given MARR is 12% and useful life is 9 years. Draw the cash flow diagram. Table Q2 (a) Alternatives Purchase Value (RM) Annual Annual Savings Cost (RM) (RM) One-off Cash flow (RM) Marke t value (RM) Proposal A 166,000 26,000 5,000 Proposal B 150,300 25,500 3.000 1.200 saving 3.000 in year 6 4,000 saving 1,500 in year 6 (9 marks) (6) The Robotic Training Centre has decided to purchase a computer system for RM113,000 with a trade-in of their old system (asset class 00.12). The old system has a book value BV of RM15,000 during trade-in. The purchase of the system will increase the companies' revenue by RM20,000 annually, whereas the associated operating expenses are expected to be RM2,000 annually. Refer to Appendix for MACRS Class Lives and recovery Periods (ADS recovery rates) respectively. Determine the Alternative Depreciation System (ADS) depreciation deductions, before-tax cash flow, taxable income, cash flow for income taxes and after-tax cash flow for this system, if an effective income tax rate of 35% is used by the company. (7 marks) (11) Determine the after-tax using present worth, PW if the after-tax MARR equals 0.75% per year. Evaluate whether the investment is profitable. (4 marks) Q2(a) Globe Engineering SDN. BHD. is evaluating a new Water Sprinkle System offered by two companies. Table Q2(a) shows the list of proposals. Select the preferred proposal based on incremental analysis annual worth, AW if the given MARR is 12% and useful life is 9 years. Draw the cash flow diagram. Table Q2 (a) Alternatives Purchase Value (RM) Annual Annual Savings Cost (RM) (RM) One-off Cash flow (RM) Marke t value (RM) Proposal A 166,000 26,000 5,000 Proposal B 150,300 25,500 3.000 1.200 saving 3.000 in year 6 4,000 saving 1,500 in year 6 (9 marks) (6) The Robotic Training Centre has decided to purchase a computer system for RM113,000 with a trade-in of their old system (asset class 00.12). The old system has a book value BV of RM15,000 during trade-in. The purchase of the system will increase the companies' revenue by RM20,000 annually, whereas the associated operating expenses are expected to be RM2,000 annually. Refer to Appendix for MACRS Class Lives and recovery Periods (ADS recovery rates) respectively. Determine the Alternative Depreciation System (ADS) depreciation deductions, before-tax cash flow, taxable income, cash flow for income taxes and after-tax cash flow for this system, if an effective income tax rate of 35% is used by the company. (7 marks) (11) Determine the after-tax using present worth, PW if the after-tax MARR equals 0.75% per year. Evaluate whether the investment is profitable. (4 marks)
