Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

This are all information that is provided for the question, please help me Yaya Berhad intends to purchase equipment for RM1,500,000. The equipment has a

This are all information that is provided for the question, please help me

image text in transcribed

Yaya Berhad intends to purchase equipment for RM1,500,000. The equipment has a 5-year useful life and will be depreciated on a straight-line basis. Addition of the equipment requires additional working capital of RM20,000. The RM20,000 is expected to be recaptured at the end of the project. Yaya 's marginal tax rate is 32%. Use of the equipment is expected to change the company's reported EBIT by RM600,000 in year one, RM700,000 in year two, RM550,000 in year three, RM200,000 in year four, and RM100,000 in year five. Due to changing market conditions, the equipment estimated disposal value of RM100,000 at the end of year five. Required: a) Calculate the project initial outlay and the incremental free cash flows over the life of the project. (2 Marks) b) What is the Net Present Value of the proposed project? (7 Marks) c) Comment on the acceptability of the project. (1 Mark)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Accounting Information For Decision Making

Authors: Anthony A. Atkinson

7th Edition

1618533517, 9781618533517

More Books

Students also viewed these Accounting questions