Wall Paper Sdn Bhd (Wall Paper) is considering a proposal to replace its old printing machine...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Wall Paper Sdn Bhd (Wall Paper) is considering a proposal to replace its old printing machine with a new sophisticated and latest model. The new printing machine costing RM620,000 is expected to have a useful life of four years. In order to fix the machine, Wall Paper needs to pay for freight and installation charges of RM40,000 and RM80,000 respectively. The training cost of RM10,000 will be borne by the supplier. At the end of the useful life, the new printing machine would have a salvage value of RM40,000. Meanwhile, the old printing machine which was bought six years ago at a cost of RM200,000 has become obsolete and incurred high maintenance cost. It is depreciated using a straight-line method over 10 years of estimated useful life. The old printing machine can be sold for RM48,750. However, the obsolete printing machine has no salvage value. The purchase of the new printing machine will require Wall Paper to get additional funding of RM450,000 from HKBC Bank and it needs to pay RM27,000 of interest charges annually. It is expected that with the use of the new printing machine the company would be able to meet the rapidly rising demand for its products. Therefore, Wall Paper have to increase the investment in Inventories by RM60,000. The current year sales using the existing machine is RM400,000 and sales forecast for the new machine are as follows: Year 1-3 Year 4 The existing printing machine normally will cost the company to incur electricity charges of RM200,000, salaries of RM60,000 and manufacturing costs of RM340,000. The projected costs using the new printing machine are as follows: a. Electricity charges Salaries L ii. ii. RM640,000 RM720,000 Year 1-3- Year 4 Manufacturing cost Year 1-3 Year 4 The company's tax rate is 24% and cost of capital is 10%. The company policy is to provide annual depreciation using a straight-line method. The expected payback period is 3 years. Required: Calculate the followings: Initial outlay Net annual cash flow Terminal cash flow RM140,000 per year RM40,000 RM30,000 RM365,000 RM375,000 oux Wall Paper Sdn Bhd (Wall Paper) is considering a proposal to replace its old printing machine with a new sophisticated and latest model. The new printing machine costing RM620,000 is expected to have a useful life of four years. In order to fix the machine, Wall Paper needs to pay for freight and installation charges of RM40,000 and RM80,000 respectively. The training cost of RM10,000 will be borne by the supplier. At the end of the useful life, the new printing machine would have a salvage value of RM40,000. Meanwhile, the old printing machine which was bought six years ago at a cost of RM200,000 has become obsolete and incurred high maintenance cost. It is depreciated using a straight-line method over 10 years of estimated useful life. The old printing machine can be sold for RM48,750. However, the obsolete printing machine has no salvage value. The purchase of the new printing machine will require Wall Paper to get additional funding of RM450,000 from HKBC Bank and it needs to pay RM27,000 of interest charges annually. It is expected that with the use of the new printing machine the company would be able to meet the rapidly rising demand for its products. Therefore, Wall Paper have to increase the investment in Inventories by RM60,000. The current year sales using the existing machine is RM400,000 and sales forecast for the new machine are as follows: Year 1-3 Year 4 The existing printing machine normally will cost the company to incur electricity charges of RM200,000, salaries of RM60,000 and manufacturing costs of RM340,000. The projected costs using the new printing machine are as follows: a. Electricity charges Salaries L ii. ii. RM640,000 RM720,000 Year 1-3- Year 4 Manufacturing cost Year 1-3 Year 4 The company's tax rate is 24% and cost of capital is 10%. The company policy is to provide annual depreciation using a straight-line method. The expected payback period is 3 years. Required: Calculate the followings: Initial outlay Net annual cash flow Terminal cash flow RM140,000 per year RM40,000 RM30,000 RM365,000 RM375,000 oux
Expert Answer:
Answer rating: 100% (QA)
To calculate the initial outlay we need to consider the cost of the new printing machine freight and ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
A firm is considering a proposal to replace one of its older machines by a new one. The feasibility study on the project has cost the company $6,000. The new equipment will cost $600,000 and require...
-
Based on her analysis of the high-end chocolate market she presently served, she realized that she had a fair amount of excess machine capacity; and this situation was expected to continue for a few...
-
Genevieve Shannara has always wanted to open her own kennel and grooming services; she had been grooming pets for friends and family from her apartment for extra cash since high school. When the...
-
1. What responsibility does an organization have to ensure that its suppliers and business partners behave ethically? To whom is this responsibility owed? 2. How can an organization monitor the...
-
Explain the treatment of itemized deduction limitations for high-income taxpayers in 2016.
-
Suppose that the government imposes a proportional income tax on the representative consumer's wage income. That is, the consumer's wage income is w(1 t)(h l) where t is the tax rate. What effect...
-
What does the internal control system comprise, according to ISA 400?
-
Dr. Gulakowicz is an orthodontist. She estimates that adding two new chairs will increase fixed costs by $ 150,000, including the annual equivalent cost of the capital investment and the salary of...
-
Institutional investors can impact corporate decisions Current strategies can limit future options Poor governance undermines shareholder value Hubris can derail good decision making Things looked...
-
Handy Howard's Incorporated, is a student co-op. Handy Howard uses a perpetual Inventory system, The following transactions (summarized) have been selected for analysis: a. Sold merchandise for cash...
-
A farmer will construct a rectangular-shaped stockyard with a total area 1000 m consisting of four equal partitions (each with an area of 250 m) as shown in the figure. Assume that the material used...
-
What is an operating system? Explain the operating system architecture to align with common operating system functions. What are the different types (categories) of operating systems (not brands or...
-
What does it mean if an activity's total float is greater than zero?
-
What are the key responsibility that a support worker must carry out in her role as an support worker?
-
The employer shared responsibility provision, ESRP penalty requires that employers provide medical coverage to their employees independent children, if they have a minimum of how many full time...
-
Describe two workplace procedures for hazard identification in a healthcare settings.
-
5 2 Find the values of sint, cost, tant, csct, sect, and cott, if P = is the point on the unit circle that corresponds to the real number t. 3'3 sint= (Simplify your answer including any radicals....
-
An 8.0 kg crate is pulled 5.0 m up a 30 incline by a rope angled 18 above the incline. The tension in the rope is 120 N, and the crates coefficient of kinetic friction on the incline is 0.25. a. How...
-
Solo Limited makes and sells a single product. The following data relate to periods 1 to 4 Normal activity is 500 units and production and sales for the four periods are as follows: There were no...
-
Casement Ltd makes windows with two types of frame: plastic and mahogany. Products using the two types of materials are made in separate premises under the supervision of separate production...
-
Tungach Ltd make and sell a single product. Demand for the product exceeds the expected production capacity of Tungach Ltd. The holding of stocks of the finished product is avoided if possible...
-
Examine the cash flow measures in requirement 2 of the review problem in this chapter. Discuss the meaning of these ratios. Computing Cash Flows from Operating Activities: Indirect Method
-
During 20x7, Arizona Company issued $500,000 in long-term bonds at 96, repaid $75,000 of bonds at face value, paid interest of $40,000, and paid dividends of $25,000. Prepare the cash flows from the...
-
Lower of Cost and Net Realizable Value} Meredith's Appliance Store has the following data for the items in its inventory at the end of the accounting period: \section*{Required:} 1. Compute the...
Study smarter with the SolutionInn App