A2Z Bhd is considering the purchase of a new machine. It costs RM20,000 and requires installation...
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A2Z Bhd is considering the purchase of a new machine. It costs RM20,000 and requires installation costs of RM2,000. The new machine is estimated to have an expected useful life of 5 years with a salvage value of RM2,000 and will be depreciated using the straight-line method. The old printing machine has zero terminal book value and 5 years remaining useful life. It is depreciated using the straight-line method. It was purchased 5 years ago for RM10,000 and can be sold today for RM4,000. With the use of the new machine, annual sales are expected to increase by RM10,000 and expenses (excluding depreciation) will represent 30% of sales. This new machine will require an increase of RM1,000 in inventories. A2Z Bhd needs a larger space to store these inventories, and hence a small rom that is currently being rented out for RM1,200 per annum will be converted into a store room. Two staff were sent for training last month and the firm has paid RM5,000 training fee. The firm is paying 25% tax rate. Required: Calculate the following after-tax cash flows attributable to the new printing machine: i. Initial outlay (12 marks) Differential cash flows over the project's life (15 marks) A2Z Bhd is considering the purchase of a new machine. It costs RM20,000 and requires installation costs of RM2,000. The new machine is estimated to have an expected useful life of 5 years with a salvage value of RM2,000 and will be depreciated using the straight-line method. The old printing machine has zero terminal book value and 5 years remaining useful life. It is depreciated using the straight-line method. It was purchased 5 years ago for RM10,000 and can be sold today for RM4,000. With the use of the new machine, annual sales are expected to increase by RM10,000 and expenses (excluding depreciation) will represent 30% of sales. This new machine will require an increase of RM1,000 in inventories. A2Z Bhd needs a larger space to store these inventories, and hence a small rom that is currently being rented out for RM1,200 per annum will be converted into a store room. Two staff were sent for training last month and the firm has paid RM5,000 training fee. The firm is paying 25% tax rate. Required: Calculate the following after-tax cash flows attributable to the new printing machine: i. Initial outlay (12 marks) Differential cash flows over the project's life (15 marks)
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i After Tax salvage Value of Old Machine 14000125 10500 Initial Ca... View the full answer
Related Book For
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
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