Question $1-$ Show your workings.

Cap Stone Sdn$.$ Bhd$.($CSSB$)$ is a manufacturer of tiles and mosaic. CSSB anticipates a

projecting growth in sales to RM$500,000$ over the next four years. Therefore, CSSB is

planning to purchase of a new equipment with an estimated cost of RM$1,200,000.$ And an

additional cost on shipping and installation will be RM$20,000$ and RM$45,000,$ respectively

need to be included. The new machine will have a $4-$year useful life and will be depreciated

to zero using the straight$-$line method.

The production cost is expected to increase to RM$20,000$ every year. However, there will be

a saving of RM$20,000$ per year on labour expense. CSSB expects an increase in inventories

to RM$220,000$ and accounts payable to RM$170,000.$ The change in Net Operating Working

Capital is expected to be fully recovered at year $4.$ The machine is expected to have a

disposal value of RM$30,000.$ CSSB uses an $13\%$ discount rate for capital budgeting

purposes and the firm's income tax rate is $40\%.$

Based on the above information, you are required to answer the following questions.

a$.$ Calculate the project's initial outlay.

$(3$ Marks$)$

b$.$ Determine the Net Present Value NPV of the proposed project

$(8$ Marks$)$

c$.$ Explain whether CSSB should proceed with the project or not.

$(2$ Marks$)$

d$.$ Determine the payback period.

$(4$ Marks$)$

e$.$ Determine the discounted payback period.

$(3$ Marks$)$

$($Total: $20$ Marks$)$