QUESTION $4$

Penchana Packaging Berhad is a company that supplies packaging services. The

company is considering the purchasing of new packaging machine worth RM$90000.$ The

new machine will include the installation cost of RM$15000$ and transport cost of RM$8000.$

The new machine has a live of five years and will depreciate to zero using the straight$-$

line method.

The machine is expected to generate sales of RM$35000$ per years and will save

RM$20500$ per year in salary cost, but the maintenance costs will increase by RM$3000$ per

annum. Upon buying the machine, the inventories will increase by RM$14000$ and account

payable will increase by RM$10000.$ The depreciation of machinery is going to be

RM$6000$ per year and the tax rate is $40$ percent while the discount rate for capital

budgeting is $20$ percent.

Based on the information given, calculate the below.

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

$(3$ Marks$)$

b$)$ Calculate the Net Present Value $($NPV$)$ of the proposed project.

$(5$ Marks$)$

c$)$ Determine if Penchana Packaging Berhad should proceed with the plan.

$(3$ Marks$)$

d$)$ Calculate the payback period.

$(4$ Marks$)$

e$)$ Calculate the discounted payback peri$$d$.$

$(5$ Marks$)$

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