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Rocky Bhd. is considering to purchase a new machine which costs RM400,000. The machine will generate revenues of RM150,000 per year for five years. The
Rocky Bhd. is considering to purchase a new machine which costs RM400,000. The machine will generate revenues of RM150,000 per year for five years. The cost of materials and labour is estimated to be RM40,000 per year, and other expenses is RM5,000 per year. The machine can be scrapped for RM50,000 at the end of the project and it will be depreciated on a straight-line basis over its 5-year life. The corporate tax rate is 22 percent and the cost of capital is 13 percent. Should Rocky Bhd. purchase the machine?
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