Merah Saga Sdn. Bhd would like to buy a new automated machine to replace the old machinein producing its single product. The automated machine that the company considering costsRM150,000. According to the manufacturer, the automated machine could be used for 5 yearsbut would require maintenance cost of RM1,000 per year. Besides, it would cost RM8,000more at the end of year 3 to replace wore parts. After 5 years, the automated machine could besold for RM5,500.The company estimates that the cost to operate the machine will be RM5,200 per year whichis far lower than operating cost of the old machine at RM28,000 per year. In addition toreducing costs, the automated machine will increase production by 8,000 units per year. Thecompany realizes a contribution margin of RM2.20 per unit.Required:a. Calculate the annual net cash inflows that will be provided by the automated machine.b. Compute the net present value of the automated machine if the required rate of return is 20%.

Net Present Value = Present Value of Cash Inflow - Cash Outflow

Answered: a. Calculate the annual net cash…

a. Calculate the annual net cash inflows that will be provided by the automated machine. b. Compute the net present value of the automated machine if the required rate of return is 20%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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