Global Satellite Network company are increasing its booster thrust power to win more mini satellite launch contracts from USA companies. A piece of earth-based tracking equipment is expected to require an investment of RM520,000.00 and will result in a profit of RM42,000.00 annually. Research contribution attribute will amount one-off grant saving RM110,000.00 in fifth year. The equipment requires a minor service overhaul annually that cost RM5,000.00 per year. At eleventh year, a major overhaul costing RM25,000.00 will be required. This equipment will have a salvage value of RM95,000.00 at the end of twentieth year and the MARR = 5%. Evaluate whether this project is desirable investment by using the Benefit-Cost Ration (AW). Include the cash flow diagram in your calculation.

Global Satellite Network company are increasing its booster thrust power to win more mini satellite launch contracts from USA companies. A piece of earth-based tracking equipment is expected to require an investment of RM520,000.00 and will result in a profit of RM42,000.00 annually. Research contribution attribute will amount one-off grant saving RM110,000.00 in fifth year. The equipment requires a minor service overhaul annually that cost RM5,000.00 per year. At eleventh year, a major overhaul costing RM25,000.00 will be required. This equipment will have a salvage value of RM95,000.00 at the end of twentieth year and the MARR = 5%. Evaluate whether this project is desirable investment by using the Benefit-Cost Ration (AW). Include the cash flow diagram in your calculation.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 21BEA

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