Queen's Fabrication Shop is purchasing a new rivet machine to replace an existing one. The new machine costs RM8,000 and will require an additional cost of RM1,000 for modification. It will be depreciated using simplified straight-line depreciation over five years. The new machine operates much faster than the old machine and with better quality. Consequently, sales are expected to increase by RM2,100 per year for the next five years. While it is faster, it is fully automated and ill result in increased electricity costs for the firm by RM700 per year. It will, however, save about RM850 per year in labor cOsts. The old machine is 20 years old and has already been fully depreciated. If the firm's marginal tax rate is 28%, compute the after-tax incremental cash flows for the new machine for year 1. A. RM450 B. RM2,698 C. RM2,124 D. RM1,620
11. Queen's Fabrication Shop is purchasing a new rivet machine to replace an existing one.
The new machine costs RM8,000 and will require an additional cost of RM1,000 for
modification. It will be depreciated using simplified straight-line
years. The new machine operates much faster than the old machine and with better
quality. Consequently, sales are expected to increase by RM2,100 per year for the next
five years. While it is faster, it is fully automated and ill result in increased electricity
costs for the firm by RM700 per year. It will, however, save about RM850 per year in labor
cOsts. The old machine is 20 years old and has already been fully depreciated. If the
firm's marginal tax rate is 28%, compute the after-tax incremental
machine for year 1.
A. RM450
B. RM2,698
C. RM2,124
D. RM1,620
12. Prince Industries is considering purd yasing a new machine. It will replace an existing but
obsolete machine that will be sold för RM40,000. The existing machine is 8 years old,
cost RM150,000, had a 10-year useful life, and is being depreciated to zero using the
straight-line method. Prince's income tax rate is 40%. What is the after-tax salvage value
of the old machine?
A. RM6,000
B. RM24,000
C. RM36,000
D. RM40,000
13. Princess Berhad is considering the acquisition of a new processing line. The processor
can be purchased for RM3,750,000; it will have a 10-year useful life. It will cost
RM165,000 to ship and RM85,250 to install the processor. A recently completed feasibility
study that was performed at a cost of RM65,000 indicated that the processor would
produce a positive
to zero expected salvage value. Studies have shown that employee-training expenses
will be RM125,000. What will be the annual depreciation expense of the processing line
for capital budgeting purposes?
A. RM375,000
B. RM419,025
C. RM390,000
D. RM400,025
14. King Shade Berhad will use an estimated 50,000 gumbands in its manufacturing process
next year. The carrying cost of gumband inventory is RM.04 per unit and the cost of
reordering gumbands is RM50 per order. What is King Shade's economic ordering
quantity for gumbands (round to the nearest 100 gumbands)?
A. 11,200
B. 10,200
C. 10,700
D. 12,100
15. Sisters Berhad collects its
of 8.6%. On average, Sisters Berhad has about 113 days' worth of inventory on hand.
The firm's times interest earned is 6.33 and accounts payable are paid in about 38 days.
What is the firm's "cash conversion cycle"?
A. 15
B. 214
C. 161
D. 123
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