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QUESTION 4 Penchana Packaging Berhad is a company that supplies packaging services. The company is considering the purchasing of new packaging machine worth RM 9

QUESTION 4
Penchana Packaging Berhad is a company that supplies packaging services. The
company is considering the purchasing of new packaging machine worth RM90000. The
new machine will include the installation cost of RM15000 and transport cost of RM8000.
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 RM35000 per years and will save
RM20500 per year in salary cost, but the maintenance costs will increase by RM3000 per
annum. Upon buying the machine, the inventories will increase by RM14000 and account
payable will increase by RM10000. The depreciation of machinery is going to be
RM6000 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 perid.
(5 Marks)
(Total: 20 Marks)
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