Master Machine Berhad is considering a four-year project to improve its production efficiency. Buying a new machine press for RM385,000 is estimated to result in RM145,000 in annual pre-tax cost savings. The press is depreciated using straight-line method of 5 years, and it will have a salvage value at the end of the project of RM45,000. The press also requires an initial investment in spare parts inventory of RM20,000, along with an additional RM3,100 in inventory for each succeeding year of the project. If the company’s tax rate is 22 percent and its discount rate is 9 percent, should the company buy and install the machine press?

Question

Master Machine Berhad is considering a four-year project to improve its production efficiency. Buying a new machine press for RM385,000 is estimated to result in RM145,000 in annual pre-tax cost savings. The press is depreciated using straight-line method of 5 years, and it will have a salvage value at the end of the project of RM45,000. The press also requires an initial investment in spare parts inventory of RM20,000, along with an additional RM3,100 in inventory for each succeeding year of the project. If the company’s tax rate is 22 percent and its discount rate is 9 percent, should the company buy and install the machine press?

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Finance

Capital Budgeting

Related Finance Q&A

Find answers to questions asked by students like you.

Q: Throughout the 1990s, the equity premium fell considerably especially in the USA. One conceivable re...

A: Hey, since there are multiple sub-part questions posted, we will answer the first three questions. I...

Q: List 5 application examples of banking or finance sector using blockchain technology For each exampl...

A: Payment Processing- Blockchain makes cross border payments faster, more accurate and less expensive....

Q: Suppose I secure a simple interest note for $4500.  The length of the note is 102 months and the int...

A: Interest = Principal * rate * time  Interest = $4500 * 6.20% * 102 /12 Interest = $2,371.50  

Q: Please answer using the methods or patterns of comparison. Thank You!

A: Computation:

Q: Warning: Rounding in the calculation of monthly interest rates is discouraged. Such rounding can lea...

A: Monthly payment estimation = loan amount / (n*12) Where n = no. of years 

Q: Dakota Corporation I5-year bonds have an equilibrium rate of return of 8 percent For all securities,...

A: Given: Equilibrium rate of return = 8% Inflation risk premium = 1.75% Liquidity risk premium = 0.25%...

Q: A corporate bond that you own at the beginning of the year is worth $975. During the year, it pays $...

A: The provided information are: Opening price = $975 Interest payment = $ 35 Closing price = $965

Q: (Annual Percentage Yield) Compute the cost of the following trade credit terms using the compounding...

A: Trade credit will be offered by suppliers to attract more customers. Customers who avail this credit...

Q: What are the features of the discounted payback period

A: DPP is the total time taken for the initial amount to equal to be the amount of discounted value of ...

Q: You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no sp...

A: Sum of Inflation premium and real interest rate is interest rate. Hence, the inflation premium is th...

Q: OLA#10.4 A company is evaluating the feasibility of investing in machinery to manufacture an automot...

A: Net present value = present value of future cashflow discounted at 7% Cashflow of year 1-7 =(8900 co...

Q: Ten ​$7,000 bonds redeemable at par bearing 10% coupons payable quarterly are sold seven years befor...

A: Bonds are the financial instruments that are bought or sold to raise funds at fixed interest for fix...

Q: The Estrella-Pantaleon Bridge connecting Estrella, Makati City to Barangka Drive in Mandaluyong is a...

A: (a) Cost of asphalt overlay =PhP 11,000/m2 Therefore, total initial cost of the asphalt overlay =PhP...

Q: Olympic Sports has two issues of debt outstanding. One is a 4% coupon bond with a face value of $34 ...

A: Formula for Before tax cost of debt: Before tax cost of debt = WA*rA + WB*rB After tax cost of debt ...

Q: Finance Question

A: Formula for calculating the installment amount is: EMI formula = [P*r*(1+r)^n]/[(1+r)^n - 1]

Q: FFC is trying to establish its optimal capital structure. Its current capital structure consists of ...

A: FFC’s estimated cost of equity if capital structure is 25% debt and 75% equity As per CAPM, Expected...

Q: Jorsen Kithak wishes to analyze the two cases of annuity for 10-years, C and D. Annuity C is an ordi...

A: There are two types of annuity which are as follows: Ordinary annuity: It requires payment at the e...

Q: Q A friend asks to borrow $55 from you and in return will pay you $58 in one year. If your bank is o...

A: a) Future value = Present value * (1+rate)^year  

Q: Consider a 20-year mortgage for $174,334 at an annual interest rate of 5%. After 8 years, the mortga...

A: Time period = 20 years  Value of mortgage = $174,344 Annual interest rate = 5% Refinancing time peri...

Q: Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 8.25%, and the risk-free ra...

A: Here, The question demands required rate of return of market not of stock therefore to calculate the...

Q: You are evaluating the performance of two portfolio managers, and you have gathered annual return da...

A: Year Manager X Return (%) (xi-x_) (xi-x_)2 Manager Y Return (%) (yi-y_) (yi-y_)2 1 -2.5 -7 49 -6.5...

Q: tion will render the M&O cost lower at $0.5 million per year. At an interest rate of 12% per year an...

A: Lined ponds  Construction costs =$11 million  MO cost=$2.3 million per year  interest rate =12% Peri...

Q: 1) Newman Automobiles Manufacturing is considering two alternative investment proposals with the fol...

A: Payback Period  = Initial Investment / Annual cashflow  

Q: how to get numbers underlined in red?

A: CCA=Capital Cost Allowance UCC= Undepreciated Capital Cost CCAt=UCC×dThe incremental UCC is calculat...

Q: Sales (75,000units)                                                                      P 750,000  ...

A: Degree of combined leverage = Contribution /EBT    

Q: 4. Introduction to real options Consider the following statement about real options: Sometimes...

A: Real options are options which provides the management with the rights to make certain business deci...

Q: Kristin is a distributor of bras picture frames. For 20X4, she plans to purchase for P30 each and se...

A: Operating Income = Sales -Purchase -Shipment cost - Fixed Cost

Q: Jessica’s annual salary decreased by $3800, which was a 9% decrease.  What was Jessica’s original sa...

A: Original Salary = $ amount decreased in salary / % decrease   

Q: A couple buys a $200000 home, making a down payment of 20%. The couple finances the purchase with a ...

A: Monthly payments are calculated using excel PMT function  

Q: Sales (30,000units)                                                                  P 150,000      ...

A: Degree of operating leverage = Contribution / (contribution - fixed cost)  

Q: Year       Cashflow     Rat2 @ 12% 0             -15600 1               6800 2               8000   ...

A: Discounting Approach or time-adjusted approach determines the present value of all future cash flows...

Q: Kristin is a distributor of bras picture frames. For 20X4, she plans to purchase for P30 each and se...

A: Fixed Cost = P240,000 Add- Add shipment cost = (500*60) = P30,000    

Q: Time Required to Reach a Goal If Tanisha has $100 tc invest at 4% per annum compounded monthly, how ...

A: Future value = Present value * (1+r)^n Where r= rate per period n = no. of compounding period       

Q: I want to learn part a-b and e answers and my answers for c-d-f is correct ı checked them.Thanks a l...

A: NET PRESENT VALUE : Present value of cash inflow - present value of cash outflow. IRR : rate of retu...

Q: Please solve all part

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for yo...

Q: In December 2015, General Electric (GE) had a book value of equity of $98 billion, 9.4 billion share...

A: Market capitalization, also known as market cap refers to the total market value of the outstanding ...

Q: I'm struggling with the area "indicate how the internal rate of return is calculated using the facto...

A: Equation needed  Present value FACTOR =1-(1+r)-n/r i=interest rate =internal rate of return  n=6 yea...

Q: Q.What is the advantage of an ETF relative to open-end and closed-end investment company? ____ A) In...

A: ETF has quite advantages over open ended and closed ended investment company.    

Q: Please show working   Please answer ALL OF QUESTIONS 1 AND 2   1. A 7% semiannual coupon bond mature...

A: Since you have posted multiple questions, we will solve the first question for you. If you want any ...

Q: 1) see picture

A: Formula for calculating dividend is: Dn = Dn-1*(1+g) Where D is the dividend N is the time period g ...

Q: When working with the CAPM, which of the following factors can be determined with the most precision...

A: Capital asset pricing model uses the beta factor to estimate the risk of a given security.

Q: Find the present value of a deferred annuity of P4,800 every six months for 7 years, if the first pa...

A: Six months payment =4800 Period =7 years =14 semiannual  interest rate =5.5% semiannual interest =2....