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Your company QE2 Inc is considering a new project whose data are shown below The equipment that would be used would be depreciated by the straight-line method over its 4- year life and would have

Your company, QE2 Inc., is considering a new project whose data are shown below. The equipment that would be used would be depreciated by the straight-line method over its 4- year life and would have some positive salvage value. Revenues and other operating costs are expected to be constant over the project's 4-year operating life. Some new working capital would be required and only 80% will be recovered at the end of the project's life. Should QE2 Inc. proceed with the new project? Use NPV and IRR to decide. Equipment cost Installation cost RM60,000.00 RM10,000.00 Investment in working capital (Inventories) Sales revenue, each year Operating cost, each year, excluding depreciation Salvage value RM 5,000.00 RM50,000.00 RM25,000.00 RM10,000.00 Tax rate 30% Required rate of return 12% [Total: 11 marks] N.B: Round-up all cash flows to the nearest RM1.00 and use 2-decimal places for IRR

Aug 16 2020 View more View Less

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