Precision Equipment is in the process of upgrading and modernizing its plant. This involves the upgrading...

 

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Precision Equipment is in the process of upgrading and modernizing its plant. This involves the upgrading of one of its measuring equipment items as it gives wrong readings and is increasingly unreliable. The information on the upgrading is as follows: Cost information: Cost of upgrading the measuring equipment Working capital requirement (beginning of the project) (Note: Working capital is recovered at the end of useful life) The annual cash operating inflows (savings) before tax Other Information: Depreciation method Expected useful life of the equipment (no salvage value) Required rate of returns Income tax rate Required: 1. Calculate the following for the new equipment: a. Annual net operating income after tax. b. Annual net operating cash inflows after tax c. Accrual accounting rate of returns (based on initial investment) d. Payback period RM 924,000 11,000 165,000 Straight line 12 years 10% 25% (2 marks) (2 marks) (2 marks) Precision Equipment is in the process of upgrading and modernizing its plant. This involves the upgrading of one of its measuring equipment items as it gives wrong readings and is increasingly unreliable. The information on the upgrading is as follows: Cost information: Cost of upgrading the measuring equipment Working capital requirement (beginning of the project) (Note: Working capital is recovered at the end of useful life) The annual cash operating inflows (savings) before tax Other Information: Depreciation method Expected useful life of the equipment (no salvage value) Required rate of returns Income tax rate Required: 1. Calculate the following for the new equipment: a. Annual net operating income after tax. b. Annual net operating cash inflows after tax c. Accrual accounting rate of returns (based on initial investment) d. Payback period RM 924,000 11,000 165,000 Straight line 12 years 10% 25% (2 marks) (2 marks) (2 marks)

Answer rating: 100% (QA)

Lets calculate each of the required values for the new equipment a Annual Net Operating Income After ... View the full answer