Topex Sdn Bhds management is always looking for ways to improve productivity and efficiency. This is the more important in view of rising wage costs and difficulty in hiring workers. The company is looking to buy a new CNC grinding machine to replace the old machine that had been bought for RM100,000 5 years ago. The old machine has a life of 4 years. If sold now this old machine can fetch RM 5,000. Topexs management is considering a new and more efficient machine. This new machine will cost RM170,000 and can last for 4 years. The resale value then is RM20,000. Topex will also incur freight and installation charges of RM1,000 and RM9,000 respectively. The new machine is more productive and can generate RM62,000 more contributions a year. Spoilage cost of the new machine would be RM2,000 a year, while the current spoilage is RM5,000 a year. The business is also going to increase its working capital by RM10,000 to provide this machine with more inventories. Tax rate is 30%. a) Complete the cash flows for initial outlay, life and termination. (13 marks)

ANSWERS QUESTION 4 - Initial - Cost of New Machine (170,000) - Sales of the old machine fill - Less: Tax on sales of old machine(30\%) (fill) fill - Freight Charges ( fill ) - Installation charges ( fill ) - Additional Working Capital - Total - Life - Increase Contribution XXXXX fill - Reduction in spoilages XXXX fill - Less: Depreciation (XXXX) fill - Less: Tax (XXXX) fill - Total XXXXX - Termination - Sales of new machine after 4 years xxxxx fill - Tax on the sale of new machine (xxx) fill - Net income on sales of machine xx - Additional working capital XXX - Total xxxx