Reference no: EM132739967

Good food Berhad (GFB) is considering introducing new product in the coming year. Forecasted sales generated from the new product is as follows:

year Sales (RM)

1 40,000
2 30,000
3 20,000
4 10,000

• Expenses are expected to be 40% of sales and working capital required in each year is expected to be 20% of sales for the following year. The new product will require an immediate investment on equipment at a cost of RM45,000. This equipment will be depreciated on a straight-line basis for 4 years with a zero-salvage value. GFB needs to pay tax at a rate of 40% and the tax will be paid in the same year.

From the above information, you are required to :

Problem a) Estimate the cash flows for each year if GFB wants to proceed with the introduction of the new product.