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The replacement of old machine will result the following changes: Old machine Machine TKC Machine RMR Annual sales Increase by 20% Decrease by 5% Increase by 2.5% Decrease by 1.5% Increase by 35% Decrease by 3% RM500,000 Annual cost of defects RM80,000 Annual operating cost Quarterly maintenance RM50,000 RM10,000 Increase by 4% Increase by 2% cost Initial investment in Net working capital NA RM30,000 RM20,000 Assume that the company's cost of capital and tax rate is 10% and 40% respectively. From the replacement plan, calculate: i) Internal rate of return (IRR)

The replacement of old machine will result the following changes: Old machine Machine TKC Machine RMR Annual sales Increase by 20% Decrease by 5% Increase by 2.5% Decrease by 1.5% Increase by 35% Decrease by 3% RM500,000 Annual cost of defects RM80,000 Annual operating cost Quarterly maintenance RM50,000 RM10,000 Increase by 4% Increase by 2% cost Initial investment in Net working capital NA RM30,000 RM20,000 Assume that the company's cost of capital and tax rate is 10% and 40% respectively. From the replacement plan, calculate: i) Internal rate of return (IRR)

FINANCIAL ACCOUNTING
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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The replacement of old machine will result the following changes: Old machine Machine TKC Machine RMR Annual sales RM500,000 Increase by 20% Decrease by 5% Increase by 2.5% Decrease by 1.5% Increase by 35% Decrease by 3% Annual cost of defects RM80,000 Annual operating cost Quarterly maintenance RM50,000 Increase by 4% RM10,000 Increase by 2% cost Initial investment in Net working capital NA RM30,000 RM20,000 Assume that the company's cost of capital and tax rate is 10% and 40% respectively. From the replacement plan, calculate: i) Internal rate of return (IRR)
Transcribed Image Text:The replacement of old machine will result the following changes: Old machine Machine TKC Machine RMR Annual sales RM500,000 Increase by 20% Decrease by 5% Increase by 2.5% Decrease by 1.5% Increase by 35% Decrease by 3% Annual cost of defects RM80,000 Annual operating cost Quarterly maintenance RM50,000 Increase by 4% RM10,000 Increase by 2% cost Initial investment in Net working capital NA RM30,000 RM20,000 Assume that the company's cost of capital and tax rate is 10% and 40% respectively. From the replacement plan, calculate: i) Internal rate of return (IRR)
Currently, this company is considering replacing an existing machine used in production that was purchased 5 years ago for RM125, 000 with a new computer system that could improve the company's operations. The old machine is being depreciated under straight line method over its useful life of 10 years with no salvage value. Its current market value is RM5, 000. Chief Financial Officer for this company, Mr Abraham Teo has reviewing two (2) options: Machine TKC imported from China and Machine RMR imported from Japan. Below is the information provided for the new machine. Machine TKC Machine RMR Cost of Asset RM200,000 RM150,000 RM12,000 Freight and transportation RM10,000 cost Installation cost RM5,000 RM3,000 RM8,000 Renovation cost (before installation of the machine) RM5,000 Training cost (to operate the NA RM5,000 machine) Depreciation method Salvage value Straight line RM10,000 Straight line RM8,000 5 years Useful life 5 years
Transcribed Image Text:Currently, this company is considering replacing an existing machine used in production that was purchased 5 years ago for RM125, 000 with a new computer system that could improve the company's operations. The old machine is being depreciated under straight line method over its useful life of 10 years with no salvage value. Its current market value is RM5, 000. Chief Financial Officer for this company, Mr Abraham Teo has reviewing two (2) options: Machine TKC imported from China and Machine RMR imported from Japan. Below is the information provided for the new machine. Machine TKC Machine RMR Cost of Asset RM200,000 RM150,000 RM12,000 Freight and transportation RM10,000 cost Installation cost RM5,000 RM3,000 RM8,000 Renovation cost (before installation of the machine) RM5,000 Training cost (to operate the NA RM5,000 machine) Depreciation method Salvage value Straight line RM10,000 Straight line RM8,000 5 years Useful life 5 years
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