Sigma Sdn. Bhd. (Sigma) should replace the old printing machine with a new printing machine. Sigma is using a printing machine where its original cost was RM25,000. The printing machine is now 5 years old and has a current market value of RM5,000. The printing machine is being depreciated over a 10-year life toward zero salvage value. Depreciation is on straight line basis. Management is contemplating to purchase a new printing machine which will cost RM50,000 and the estimated salvage value is RM1,000. Expected savings from the new printing machine is RM3,000 a year. Depreciation is on straight line basis over a seven-year life and the cost of capital is 10%. If the tax rate is 50%, discuss whether Sigma should replace the asset.

1. Calculate and explain the total outflow at time of investment is made.
2. Calculate and explain the total inflows of the proposed replacement.
3. Calculate and explain the Net Present Value (NPV) of the proposed replacement.