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QuestionPepper Berhad is a company that was incorporated 2 y

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QuestionPepper Berhad is a company that was incorporated 2 years ago. The main activity of the company is producing cat food. The products are sold at RM5 per unit with a cost of RM2 per unit. The?ompany’s factory is in Seri Iskandar, Perak.?urrently the company owns production machines with the capacity to produce 12,000 units per month. Currently, due to lack of resources the company is able to produce and sell only 5,000 units every month.Currently the company owns a second-hand van which is very old. The van was bought 2 years ago at a price of RM40,000 and is expected to have a useful life of another 2 years. The current market value of the vehicles is RM15,000.The van is currently being used to transport workers from the hostel to the factory. Every day, the driver must bring along the technician in case of any break down. The company employs only one technician which is a paid a salary RM4,000 per month who is responsible to maintain all machines and the van. When the van is out to send or pick up workers, the technician is not available to make repair to the machines and this has caused the company to suffer losses of sale of 5,000 units per month.The demand for their product is expected to increase as the company had received orders from Penang and Selangor. However, the companies are unable to fulfil the orders. The company were unable to use any logistics companies to help them deliver their products as it requires a special equipment to ensure that their product stays fresh. If the company can meet the demands, the company can finally use the machines to its full capacity.Currently, the?ompany’s van travels an average?,400 km per month in relation to transport the workers. The average fuel consumption is 15 liters for every 100 km. Maintenance is RM500 per month. If the company wants to supply to Penang and Selangor, it needs to cover an estimated distance of 12,000 km per month to make deliveries.Since the company has a retained profit of RM300,000, the directors of the company have allocated a budget of RM100,000 to buy a new 7-seater vehicle.The company also plans to use the new van to cover Penang and Selangor area. However, the company needs to make modifications to the van which will cost them RM5,000. Furthermore, the company will need to add more workers that will increase labour cost by RM 60,000. The annual electricity bills are also expected to increase by RM10,000.The cost of financing if the company choose to utilize the retained earnings is 14%. New issuance of shares will cost them 16%. Since the company debt ratio is quite high, the cost of debt is 9% (before tax) if the company uses 10% financing from debts. If the company choses to increase the use of debts the cost of debts are presented in?ABLE Q2.?he company’s required rate of return is?2% and the tax rate is 25%.You are required to construct detailed capital budgeting and cost of capital plan for a 7-seater van proposal.BusinessFinanceACCOUNTING GDB2053

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