Great Ventures is considering to invest in 3 projects. Now, business in the middle considering the option to buy new machine. After discussion, management decide to buy new machine that cost RM150,000 and has 5 years life. The interest rate is 15% and it is expected that the net cash flow is RM20,000 annually. Required: Calculate the NPV and give recommendation whether the investment is feasible.
Question 4
Great Ventures is considering to invest in 3 projects. Now, business in the middle considering the option to buy new machine. After discussion, management decide to buy new machine that cost RM150,000 and has 5 years life. The interest rate is 15% and it is expected that the net cash flow is RM20,000 annually.
Required:
Calculate the NPV and give recommendation whether the investment is feasible.
Question 5
Suria Bhd is thinking of introducing a new product line. Last month, the company conducted a market survey to study customers’ acceptance of this product. The company conducted the survey at a cost of RM50,000.
Should you include this cost in your capital budgeting analysis?
Question 6
Excel Bhd is currently using a moulding machine that was purchased five years ago with a remaining useful life of five years. The company is analyzing a proposal by the production department to replace the machine. The new machine can be purchased at RM500,000 and will
have a 5-years useful life. If the machine is used till the end of its useful life, it can be sold at RM50,000. However the company needs to pay another RM25,000 to modify the machine for its special
assets. The corporate tax rate is 25%.
Required: You need to compute the following:
i) Initial Outlay
ii) Differential cash flows over the project’s life
iii) Terminal cash flows
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