Pedas Bhd. is company that involves in the production of chili sauce under the b

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Pedas Bhd. is company that involves in the production of chili sauce under the brand name of PODEHI The company plans to buy a new chili-grinding machine that costs RM240,000 for the purpose of increasing its current production capacity. Delivery and installation costs of the machine are Rm500 and RM1,500 respectively while the training costs for the use of the machine is RM800. The new machine will be able to increase annual sales by RM50,000 and at the same time be able to save production costs by RM5,000 per year. The machine has a useful life of 5 years and its depreciated using a simplified straight-line method. Pedas Bhd. expects that the machine can be sold as scrap metal at the end of its useful life for RMS,000. The maintenance and repair costs for the machine is RM2,200 per year. In addition, the purchase of the machine will also result in an additional net working capital of RM5,000 and is expected to stay the same every year until the end of the project. The tax rate is 28% while the required rate of return is 14%. Calculate the initial outlay of the project. Calculate the annual cash flows from year 1 until year 4. Calculate the terminal value of the project in year 5. What is the cash flow in year 5. Calculate the NPV of the project. Should the company go ahead with the plan?

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