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Determine whether muar berhad should accept or reject

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Reference no: EM133126994

Question - Muar Berhad consists of several divisions, one of which is the Transportation Division. The company has decided to dispose of this division since it no longer fits the company's long-term strategy. An offer of RM9,000,000 has been received from a prospective buyer. If General retained the division, the company would operate the division for only nine years, after which the division would no longer be needed and would be sold for RM600,000. If the company retains the division, an immediate investment of RM500,000 would need to be made to update equipment to current standards. Annual net operating cash flows would be RM1,805,000 if the division is retained. The company's discount rate is 12%. Determine whether Muar Berhad should accept or reject the offer made by the potential buyer based on net present value method.

Reference no: EM133126994

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