Tanjung Hypermarket is considering to install bar code system in its newly hypermarket in Seremban. Based on the information available given and the application of cost benefit analysis, recommend to the company whether it should install the bar code system. Below is some information needed: Potential benefits generated by the bar code system: where it can reduce burglary insurance premium and reduce loss retained under the policy deductible.

Costs Incurred according to the installation of the systems: cost of equipment and installation and cost of maintenance. The cost of bar code system was RM150,000 and it will have saved annual insurance premium about RM50,000. The annual maintenance cost for the system about RM15,000 and the reduction in uninsured loss (cost) about RM60,000. The expected life for the system are 10 years and companys cost of fund are 12%.

If the present value of an annuity of RM1@12% for a period of 10 years is 5.650

Identify whether the company should install the bar code system. Analyze? (15 marks)