Old Machine Machine TKC Machine RMR Revenue: Annual Sales RM 500,000 RM 600,000 RM 675,000 Expenses: Annual cost of defects 80,000 76,000 77,600 Annual operating cost 50,000 51,250 52,000 Annual maintenance cost 40,000 39,400 40,800 Annnual depreciation 42,600 33,400 Pretax income 330,000 390,750 471,200 Income tax 132,000 156,300 188,480 Net Income 198,000 234,450 282,720 Add: depreciation 42,600 33,400 Add: disposal of old machine 5,000 5,000 Annual net cash flow RM 198,000 RM 282,050 RM 321,120

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question

Assume that the company’s cost of capital and tax rate is 10% and 40% respectively. From the
replacement plan, calculate:

i) Net Present Value (NPV)

Computation of Cash flow after tax
Particulars
old Machine Machine TKC
Machine RMR
(RM)
(RM)
(RM)
Annual Revenue
500000
600000
675000
Annual Cost of defects
80000
76000
77600
Annual Operating cost
50000
51250
52000
Annual Maintenance cost ##
40000
39400
40800
Net Amount
330000
433350
504600
Less: Depreciation
42600
32400
Earning before Tax (EBT)
390750
472200
Таx @ 40%
156300
188880
Earning after Tax (EAT)
234450
283320
Cash flow after tax= EAT+ Depreciation
277050
315720
## Given : Quarterly Maintenance Cost
RM 10000
So, Annual Maintenance Cost
RM 10000 x4
RM 40000
Transcribed Image Text:Computation of Cash flow after tax Particulars old Machine Machine TKC Machine RMR (RM) (RM) (RM) Annual Revenue 500000 600000 675000 Annual Cost of defects 80000 76000 77600 Annual Operating cost 50000 51250 52000 Annual Maintenance cost ## 40000 39400 40800 Net Amount 330000 433350 504600 Less: Depreciation 42600 32400 Earning before Tax (EBT) 390750 472200 Таx @ 40% 156300 188880 Earning after Tax (EAT) 234450 283320 Cash flow after tax= EAT+ Depreciation 277050 315720 ## Given : Quarterly Maintenance Cost RM 10000 So, Annual Maintenance Cost RM 10000 x4 RM 40000
Old Machine Machine TKC Machine RMR
Revenue:
Annual Sales
RM 500,000 RM 600,000 RM 675,000
Expenses:
Annual cost of defects
80,000
76,000
77,600
Annual operating cost
50,000
51,250
52,000
Annual maintenance cost
40,000
39,400
40,800
Annnual depreciation
42,600
33,400
Pretax income
330,000
390,750
471,200
Income tax
132,000
156,300
188,480
Net Income
198,000
234,450
282,720
Add: depreciation
42,600
33,400
Add: disposal of old machine
5,000
5,000
Annual net cash flow
RM 198,000 RM 282,050 RM 321,120
Transcribed Image Text:Old Machine Machine TKC Machine RMR Revenue: Annual Sales RM 500,000 RM 600,000 RM 675,000 Expenses: Annual cost of defects 80,000 76,000 77,600 Annual operating cost 50,000 51,250 52,000 Annual maintenance cost 40,000 39,400 40,800 Annnual depreciation 42,600 33,400 Pretax income 330,000 390,750 471,200 Income tax 132,000 156,300 188,480 Net Income 198,000 234,450 282,720 Add: depreciation 42,600 33,400 Add: disposal of old machine 5,000 5,000 Annual net cash flow RM 198,000 RM 282,050 RM 321,120
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Rate Of Return
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education