Topex Sdn Bhds management is always looking for ways to improve productivity and efficiency. This is the
Question:
Topex Sdn Bhd’s management is always looking for ways to improve productivity and efficiency. This is the more important in view of rising wage costs and difficulty in hiring workers. The company is looking to buy a new CNC grinding machine to replace the old machine that had been bought for RM100,000 5 years ago. The old machine has a life of 4 years. If sold now this old machine can fetch RM 5,000. Topex’s management is considering a new and more efficient machine. This new machine will cost RM170,000 and can last for 4 years. The resale value then is RM20,000. Topex will also incur freight and installation charges of RM1,000 and RM9,000 respectively. The new machine is more productive and can generate RM62,000 more contributions a year. Spoilage cost of the new machine would be RM2,000 a year, while the current spoilage is RM5,000 a year. The business is also going to increase its working capital by RM10,000 to provide this machine with more inventories. Tax rate is 30%. a) Complete the cash flows for initial outlay, life and termination.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill