QUESTION 1 Part A IT Istiqamah Berhad, a manufacturer of IT equipment, is planning to invest RM1.2 million in a new product range and has forecasted the following financial information: Year 1 2 3 4 Sales volume (units) 40,000 50,000 60,000 70,000 Average selling price (RM/unit) 38 40 42 40 Average variable cost (RM/unit) 20 24 30 Incremental fixed costs (RM/year) 400,000 400,000 400,000 400,000 22 Working capital investment accounts for RM200,000 of the proposed RM1.2 million investment and machinery for RM 1,000,000. The company uses a four-year evaluation period for capital investment purposes, but expects to sell the new product range for several years after the end of this period. Capital investment are expected to pay back within 3 years on an undiscounted basis, and within four years on a discounted basis. The company pays tax on profit at the annual rate of 30% and claims capital allowances on machinery on 25% reducing balance basis. Balancing allowances are claimed only on the disposal of the assets. Required: a) Using the Istiqamah's current weighted average cost of capital of 11%, calculate the net present value and internal rate of return of the proposed investment. (13 marks) b) Calculate the payback period and the discounted payback period of the proposed investment. (5 marks) c) Based on the computations in (a) and (b) above, discuss the acceptability of the proposed investment