QUESTION 1 [15 MARKS] Company A is contemplating to buy a new transformer for substation X which cost RM150,000 with 9 years useful life. The machine depreciated under the MACRS with a GDS recovery period of five years. At the end of its useful life, the market value will be reduced by RM130,000. This new generator is also expected to reduce the expenses to RM30,000 annually. If the effective income tax rate is 40% and the after tax desired return on investment is 10% per year, should the company proceed on buying the generator? i) If the transformer is used and will be sold after at year 5 of its service, will it be a good investment? ii) If it is used until its useful life, should the company proceed on buying the transformer? iii) Give your suggestion, which options are better, based on your answer in i) and ii)