Two projects plans have been presented to Cempaka Holding where the effective income tax rate is 40% and MACRS (GDS) depreciation is used. Both plans have a GDS recovery period of five years. Project 1 need a capital investment of RM100,000 and need annual operation maintenance cost of RM10,000. The revenues of the project is estimated to be RM30,000 annually, with market value of RM12,000 at the end of its useful life of 7 years. On the other hand, Project 2 promises annual revenues of RM50,000 and market value of RM20,000 at the end of useful life of 5 years. The initial investment needed is RM150,000 and annual operation maintenance cost is RM20,000. 1) If the after-tax desired return on investment is 12% per year, suggest the suitable plan for the company. Give your reason for this selection ii) What is the simple payback period based on after-tax cash flow of the chosen equipment? ANSWER (0) PROJECT 1 ATCF TABLE (2 MARKS) MV-BV PW(1296) = AW(1296) PROJECT 2 ATCF TABLE (2 MARKS) MV-BV = Which one is chosen? Give your reason for this selection : ANSWER (11) What is the simple payback period based on after-tax cash flow of the chosen equipment? EOYATCF CUMULATIVE (196=0) 0 1 2 3 4 5 6 7 The simple payback period of ATCF is years Two projects plans have been presented to Cempaka Holding where the effective income tax rate is 40% and MACRS (GDS) depreciation is used. Both plans have a GDS recovery period of five years. Project 1 need a capital investment of RM100,000 and need annual operation maintenance cost of RM10,000. The revenues of the project is estimated to be RM30,000 annually, with market value of RM12,000 at the end of its useful life of 7 years. On the other hand, Project 2 promises annual revenues of RM50,000 and market value of RM20,000 at the end of useful life of 5 years. The initial investment needed is RM150,000 and annual operation maintenance cost is RM20,000. 1) If the after-tax desired return on investment is 12% per year, suggest the suitable plan for the company. Give your reason for this selection ii) What is the simple payback period based on after-tax cash flow of the chosen equipment? ANSWER (0) PROJECT 1 ATCF TABLE (2 MARKS) MV-BV PW(1296) = AW(1296) PROJECT 2 ATCF TABLE (2 MARKS) MV-BV = Which one is chosen? Give your reason for this selection : ANSWER (11) What is the simple payback period based on after-tax cash flow of the chosen equipment? EOYATCF CUMULATIVE (196=0) 0 1 2 3 4 5 6 7 The simple payback period of ATCF is years