Reference no: EM133175252

Questions -

Q1. Consider an asset that costs RM465,000 and is depreciated straight-line to zero over its six-year tax life. The asset is to be used in a four-year project; at the end of the project, the asset can be sold for RM120,000. If the relevant tax rate is 35 percent, what is the after-tax cash flow from the sale of this asset?

Q2. Wau Bulan company is considering making and selling custom kites in two sizes. The small kites would be priced at RM10, and the large kites would be RM24. The variable cost per unit is RM5 and RM11, respectively. Mohammad, the owner, feels that he can sell 2,600 of the small kites and 1,700 of the large kites each year. The fixed costs would be only RM2,100 a year and the tax rate is 34 percent. What is the annual operating cash flow if the annual depreciation expense is RM900?

Q3. The Yummy Company is looking at a new system with an installed cost of RM438,000. This cost will be depreciated straight-line to zero over the project's four-year life, at the end of which the sausage system can be scrapped for RM69,000. The sausage system will save the firm RM129,000 per year in pre-tax operating costs, and the system requires an initial investment in net working capital of RM29,000, which will be recouped at project end. If the tax rate is 35 percent and the discount rate is 9 percent, what is the NPV of this project?