Question 1 - Show your workings. Ketupat Lepat Berhad bought a used printing machine 5 years...
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Question 1 - Show your workings. Ketupat Lepat Berhad bought a used printing machine 5 years ago that it hoped would serve its printing needs for 10 years. Although the machine had performed as expected for the last five years, newer and more highly automated colour printers have now become available. The existing machine has a book value of RM100,000 and is being depreciated at RM20,000 a year toward a zero salvage value in 5 year. However, today the machine can be sold for only RM50,000. The new machine being considered costs RM300,000 to purchase, plus an additional RM10,000 in shipping and installation costs. Moreover, the new machine has an expected disposal value of RM100,000 in 5 years. The appeal of the new machine is that it is completely automated (requires two fewer employees whose combined salaries and fringe benefits total RM110,000 per year) and also does color printing. The ability to sell color ads is expected to increase the paper's ads revenues from RM150,000 per year to RM200,000. However, the added color printing feature comes at the cost of higher maintenance and ink cost of RM100,000 compared to only RM80,000 for the older machine. Ketupat Lepat Berhad faces a 24% marginal tax rate and uses a 15% discount rate to evaluate machine purchases for the printing machine. From the above information, you are required to calculate: Calculate the initial cash outflow associated with replacing the older printing machine with the new one. a. b. C. d. Calculate the operating cash flow. Calculate the net present value if the company decided to buy the new printing machine. Calculate the Discounted Payback Period. Question 1 - Show your workings. Ketupat Lepat Berhad bought a used printing machine 5 years ago that it hoped would serve its printing needs for 10 years. Although the machine had performed as expected for the last five years, newer and more highly automated colour printers have now become available. The existing machine has a book value of RM100,000 and is being depreciated at RM20,000 a year toward a zero salvage value in 5 year. However, today the machine can be sold for only RM50,000. The new machine being considered costs RM300,000 to purchase, plus an additional RM10,000 in shipping and installation costs. Moreover, the new machine has an expected disposal value of RM100,000 in 5 years. The appeal of the new machine is that it is completely automated (requires two fewer employees whose combined salaries and fringe benefits total RM110,000 per year) and also does color printing. The ability to sell color ads is expected to increase the paper's ads revenues from RM150,000 per year to RM200,000. However, the added color printing feature comes at the cost of higher maintenance and ink cost of RM100,000 compared to only RM80,000 for the older machine. Ketupat Lepat Berhad faces a 24% marginal tax rate and uses a 15% discount rate to evaluate machine purchases for the printing machine. From the above information, you are required to calculate: Calculate the initial cash outflow associated with replacing the older printing machine with the new one. a. b. C. d. Calculate the operating cash flow. Calculate the net present value if the company decided to buy the new printing machine. Calculate the Discounted Payback Period.
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Calculation of Replacement Costs and NPV for Ketupat Lepat Berhad a Initial Cash Outflow Purchase co... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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