Question
you are considering a new automatic surveillance system to replace your current contract security system. it will cost RM450,000 to get the new system and
you are considering a new automatic surveillance system to replace your current contract security system. it will cost RM450,000 to get the new system and will be depreciated straight-line to zero over the system's four-year expected life. The system is expected to be worth RM80,000 at the end of four years after removal costs and initial net working capital of RM35,000 will be reduce at the end of year life. Based on your estimation, the new system will save the cost of RM125,000 before taxes and expected to increase 15% per year starting at year 2 in contract of security costs. The tax rate 34%. You need to calculate the NPV for buying the new system with the required return is 5% and make a decision whether need to buy or not to buy
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