AM Auto Sdn Bhd provides rental cars services in Malacca area. Currently, the company has a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
AM Auto Sdn Bhd provides rental cars services in Malacca area. Currently, the company has a fleet of 10 rental cars which they intend to replace in a near future. The cost of each rental car is RM40,000. The trade-in value of each car is RM25,000 in ro Year 1 and this decreases by 20% per year subsequently. Servicing and parts cost is RM6,500 per rental car in the first year and this cost is expected to rise by 15% per year as each vehicle grows older. The cost of cleaning the interior and exterior of each rental car in order to keep it up to the quality required by the customers is RM1,500 per car in the first year and this cost is estimated to increase by 10% in Year 2. In Year 3, the cleaning cost for each rental car will be RM2,500. AM Auto Sdn Bhd has a cost of capital of 12%. Taxation is to be ignored. Required: i. Using the equivalent annual cost method, determine whether AM Auto Sdn Bhd should replace its fleet of cars after one year, two years or three years. S ar SI AM Auto Sdn Bhd provides rental cars services in Malacca area. Currently, the company has a fleet of 10 rental cars which they intend to replace in a near future. The cost of each rental car is RM40,000. The trade-in value of each car is RM25,000 in ro Year 1 and this decreases by 20% per year subsequently. Servicing and parts cost is RM6,500 per rental car in the first year and this cost is expected to rise by 15% per year as each vehicle grows older. The cost of cleaning the interior and exterior of each rental car in order to keep it up to the quality required by the customers is RM1,500 per car in the first year and this cost is estimated to increase by 10% in Year 2. In Year 3, the cleaning cost for each rental car will be RM2,500. AM Auto Sdn Bhd has a cost of capital of 12%. Taxation is to be ignored. Required: i. Using the equivalent annual cost method, determine whether AM Auto Sdn Bhd should replace its fleet of cars after one year, two years or three years. S ar SI
Expert Answer:
Answer rating: 100% (QA)
To determine whether AM Auto Sdn Bhd should replace its fleet of cars after one year two years or three years we can calculate the equivalent annual c... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,
Posted Date:
Students also viewed these accounting questions
-
Question 5 Explain how Div 7A operates. How is a "private company" defined for the purposes of Div 7A? Gary, an Australian resident, is the sole shareholder of MC Pty Ltd, a company incorporated in...
-
List three specific parts of the Case Guide, Objectives and Strategy Section (See below) that you had the most difficulty understanding. Describe your current understanding of these parts. Provide...
-
Googles ease of use and superior search results have propelled the search engine to its num- ber one status, ousting the early dominance of competitors such as WebCrawler and Infos- eek. Even later...
-
With respect to strategies used by land conservation groups to preserve land, conservation easements seem to be expanding more rapidly than buying land for preservation. In what respect might...
-
Explain how a supervisor can use feedback to improve communication.
-
Suppose that the boat has a speed of 6.7 m/s relative to the water, and that the dock on the opposite shore of the river is at the location x = 55 m and y = 28 m relative to the starting point of the...
-
Calpine Manufacturing Company uses a standard cost accounting system. In 2002, 32,000 units were produced. Each unit took several pounds of direct materials and 1 standard hours of direct labor at a...
-
The following audit procedures (labeled 1. through 8. below) are found in audit programs addressing the acquisition and payment cycle. For each audit procedure described: a. Identify the objective of...
-
Ivanhoe Electronics issues a $376,500,5%, 15-year mortgage note on December 31, 2019. The proceeds from the note are to be used in financing a new research laboratory. The terms of the note provide...
-
Emily Consultants Company has a fiscal year ending December 31. For each of the following independent situations, indicate the journal entry by selecting the appropriate account descriptions and...
-
Write computer programs for the following: Piecewise linear transformation with 2-slope change points and 3-slope levels (see lecture notes figure 3.10). These parameters(r & s) should be...
-
July 2018 Evidence July 2018 195 A woman has sued a man for injuries she received in an automobile collision at a suburban traffic circle in State A on January 1 . Both drivers were driving alone,...
-
Discuss your understanding of the comparability problems in the valuation of financial assets.
-
Fig.15.21 shows the arrangement of wheels in a compound epicyclic gear train. The sun wheel S, is integral with the annular wheel 4,. The two arms are also integral with each other. Z == 24,z= 12=96....
-
Calculate the percent error between the measured quantity, A, and the theoretical quantity, B. A = 14 B = 17 Enter your answer as a percentage, rounded to the nearest whole number. Do NOT input the...
-
Please answer the following questions relating to how organisations are financed: a)Briefly list the different sources of financing available to organisations. b)Explain one advantage and one...
-
Problem 1: A specialty coffee house sells Colombian coffee at a steady rate of 6,000 pounds annually. The beans are purchased from a local supplier for $3.00 per pound. The coffee house estimates...
-
Establish identity. cos( + k) = (-1)k cos , k any integer
-
Donna Inc Donna Inc operates a defined benefit pension scheme for staff. The pension scheme has been operating for a number of years but not following IAS 19. The finance director is unsure of which...
-
The following are extracts from the financial statements of Heidelberger Druckmaschinen AG showing the accounting policy and detailed notes regarding the provision of pensions according to IAS 19. As...
-
Kathryn Kathryn plc, a listed company, provides a defined benefit pension for its staff, the details of which are given below. Pension scheme As at the 30 April 2004, actuaries valued the companys...
Study smarter with the SolutionInn App