Question 2 * Little Star Company is considering replacing its existing machine with a new...
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Question 2 * Little Star Company is considering replacing its existing machine with a new one. The machine wa vought five years ago at a cost of RM700,000. It has another five years of remaining useful life, with Zen salvage value. If it is sold now, the company can get RM200,000.00 The new machine would cost RM1 million and is expected to have a useful life of nve years. A salvage value of RM100,000 is expected at the end of the five years. The straight-line method is used to depreciate the company's non-current assets. Due to higher efficiency, the new machine is expected to produce higher net revenue to the firm amounting to RM250,000 per year. The corporate tax rate is 25%. 22 Required: Calculate the following: a. The initial outlay b. The annual differential cash flows C. The terminal cash flows
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