QUESTION $1$

Rahang Limited is considering purchasing a new machine worth RM$28000$ with a $5$ year life expectancy. It will be depreciated using the straight$-$line method over five years. The machine will replace $10$ years old machine purchased at RM$40000$ which still has a $5$ year lifetime. The old machine depreciates RM$4000$ a year, with a book value of zero at the end of its time.

As new machines are faster than the old machines, they require additional work in process inventory of RM$5000.$ Old machines can be sold as scraps for RM $25000.$ To run the new machine there are RM$3000$ transportation costs and RM$4000$ installation cost.

The following information is obtained after purchasing the new assets:

Reduce salaries by RM$8000$ a year.

Reduce facilities benefit by RM$2000.$

Reduce cost of product damage from RM$9000$ to RM$5000$

Increase maintenance expenses by RM$5000$ per annum.

At the end of the project, the working capital be returned as incurred on the early project by RM$5000$ and the corporate tax is $30$ percent.

a$.$ Calculate the project's initial outlay.

b$.$ Calculate the differential cash flow.

C$.$ Calculate the terminal cash flow of this project.

$(2$ Marks$)$

$(10$Marks$)$

$(10$ Marks$)$

d$.$ In your opinion, state your reason if this project should be accepted.

$(3$ Marks$)$