b. Shella Bakery Sdn Bhd is also considering an investment on new updated machinery of RM500,000...

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b. Shella Bakery Sdn Bhd is also considering an investment on new updated machinery of RM500,000 expected to generate substantial cash inflows over the next five years. Unfortunately, the annual cash flows from the investment are uncertain, thus the following probability has been established: Probability Annual cash flows RM 80,000 100,000 150,000 30% 40% 30% At the end of its five-year life, the machinery is expected to be sold for RM50,000. The cost of capital is 8%. Determine whether the investment on machinery should be undertaken. (6 marks) b. Shella Bakery Sdn Bhd is also considering an investment on new updated machinery of RM500,000 expected to generate substantial cash inflows over the next five years. Unfortunately, the annual cash flows from the investment are uncertain, thus the following probability has been established: Probability Annual cash flows RM 80,000 100,000 150,000 30% 40% 30% At the end of its five-year life, the machinery is expected to be sold for RM50,000. The cost of capital is 8%. Determine whether the investment on machinery should be undertaken. (6 marks)

Answer rating: 100% (QA)

Annual cashflows 80000301000004015000030 109000 Year1 to Year4 cashflows 109000 Year5 cashflow 1090... View the full answer