Yummy Candy Sdn Bhd $($YCSB$)$ is considering purchasing a second chocolate dipping machine in order to expand their business. The information YCSB has accumulated regarding the new machine is:

Cost of the machine

RM$80,000$

Increased annual contribution margin

RM$15,000$

Life of the machine

$10$ years

Required rate of return

$6\%$

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YCSB estimates to produce more candy using the second machine and thus increase their annual contribution margin. YCSB also estimates there will be a small disposal value of the machine but the cost of removal will offset that value.

REQUIRED:

$($a$)$ By ignoring the income tax issues and assume that all cash flows occur at year$-$end except for initial investment amounts, calculate the following for the new machine:

$($i$)$ Net present value

$($ii$)$ Payback period

$($iii$)$ Discounted payback period

$($iv$)$ Accounting rate of return based on the net initial investment $($assume straight$-$line depreciation$)$

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$($b$)$ Explain TWO $(2)$ qualitative factors should YCSB consider in deciding whether to purchase the new machine.

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