QUESTION 1Jarum Industrial Tools is considering a 3-year project to improve its

QUESTION
1Jarum
Industrial Tools is considering a 3-year project to improve its production
efficiency. Buying a new machine press for RM611000 is estimated to result in
RM193000 in annual pretax cost savings. The press falls in the MACRS five-year
class (Table 1) and it will have a salvage value at the end of the project of
RM162000. The press also requires an initial investment in spare parts
inventory of RM19000 along with an additional RM2000 in inventory for each
succeeding year of the project. If the tax rate is 35 percent and the discount
rate is 12 percent should the company buy and install the machine press? Why
or why not?Table 1: Modified ACRS depreciation
allowancesQUESTION
2a)
Explain
the concept of incremental cash flow analysis and its purpose.[20 marks]
b)Explain
the difference between a sunk cost and an opportunity cost and give an example
of each.[15 marks]
QUESTION
3Chong
Motors just issued 225000 zero coupon bonds. These bonds mature in 20 years
have a par value of RM1000 and have a yield to maturity of 7.45 percent. What
is the approximate total amount of money the company raised from issuing these
bonds? (Assume semi-annual compounding)
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