QUESTION 2 (25 MARKS) (a) Delima Sdn. Bhd., is considering to purchase a RM500,000 machine to manufacture security parts for home alarm system. Delima expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Delima uses straight-line depreciation method and a 13% discount rate in evaluating capital investment. The parts are expected to generate annual cash flows of RM100,000 each year for 10 years. Required: (0) Compute the payback period for the project. (2 marks) (ii) Determine the accounting rate of return for the project, based on the initial capital investment. (2 marks) (ii) Using interpolation method, calculate the internal rate of return for the project. (4 marks) (iv) Compute the net present value of the project. (4 marks) (v) Discuss your result based on the computations above? (4 marks) (b) "Accounting profit is suffering from the deficiency of GAAP." Using three (3) points to discuss this statement. (4.5 marks) (c) "Advanced technology investment difficult to measured based on capital budgeting." Discuss the three (3) non-financial benefits of this investment. (4.5 marks) 3 Appendix 1: Annuity Table 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 2 1.886 1.859 1.833 1.808 1.783 1.759 1.735 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1.457 1.440 3 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 2074 2.042 2011 1.981 1.952 4 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2914 2855 2.798 2.743 2.690 2.639 2.289 2540 2.494 2448 2.404 2.362 5 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2926 2.864 2.803 2.745 2.689 6 5.242 5.076 4917 4767 4.623 4 486 4 355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3245 3.167 3.092 3.020 2951 7 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 8 6.733 6.463 6.210 5971 5.747 5.535 5335 5.146 4.968 4.799 4.639 4487 4 344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 9 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 4 607 4.451 4 303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 10 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4494 4.339 4192 4.054 3.923 3.799 3.682 3.571 11 8.760 8.306 7.887 7499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5 234 5.029 4.836 4.656 4.486 4 327 4.117 4.035 3.902 3.776 3.656 12 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4988 4793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 13 9.986 9.394 8.853 8358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5583 5.342 5.118 4.910 4715 4533 4 362 4.203 4.053 3.912 3.780 14 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4 802 4.611 4.432 4.265 4.108 3.962 3.824 15 11.118 10.380 9.712 9.108 8.559 8.061 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4.315 4.159 4.001 3.859 16 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 17 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5 222 4.990 4.775 4.576 4.391 4219 4.059 3.910 18 12.659 11.690 10.828 10.059 9.372 8.756 3.201 7.702 7.250 6.840 6.457 6.128 5.818 5.534 5.273 5.033 4.812 4.508 4.419 4243 4.080 3.928 19 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.343 4.635 4.442 4.263 4.097 3.942 20 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5101 4.870 4.657 4.460 4279 4.110 3.954 21 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.894 4.675 4.476 4292 4.121 3.963 22 14.451 13.163 12.042 11.051 10.204 9.442 8.7728.176 7.645 7.170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.590 4488 4 302 4.130 3.970 23 14.857 13.489 12.303 11.272 10.371 9.580 8.883 8.266 7.718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4925 4.703 4.499 4311 4.137 3.976 24 15.247 13.799 12.505 11.459 10.529 9.707 8.985 8.348 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4318 4.143 3.981 25 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4948 4721 4.514 4 323 4.147 3.985 26 15.983 14.375 13.003 11.826 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 27 16.330 14.643 13.211 11.987 10.935 10.027 9.237 8.548 7.943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.964 4.734 4.524 4332 4.154 3.990 28 16.663 14.898 13.406 12.137 11.051 10.116 9307 8.602 7984 7.441 6.961 6.534 6.152 5.810 5.502 5.223 4970 4.739 4.528 4 335 4.157 3.992 29 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5510 5229 4975 4743 4.531 4337 4.159 3.994 30 17.292 15.372 13.765 12.409 11.258 10 274 9.427 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4979 4.746 4.534 4339 4.160 3.995