Question

please dont answer my by excel .. would be better if use your PC to answer ,, as well as provide the formula

Semangat Sdn. Bhd. plans to improve its workers' safety by sending them for training. The company will enjoy rebates in premium by the insurance company if the workers completed the training course (assuming that the only benefits of the training is the insurance premium rebates). The firm has a total of 150 workers and the cost of the training course for each is RM1,000. If all of the workers enrol in the course immediately, the company will enjoy a rebate of RM60,000 in the company's insurance premium this year and rebate of RM40,000 in each of the subsequent 3 years. The cost of capital is 5%. Should you recommend Semangat Sdn Bhd to proceed with the plan? Why?

Answer 1

Total cost to train workers = No of workers x Training cost per worker
= 150 x 1000
= 150,000 RM
Now let us calculate present value of rebate company will get

Year	Rebate amount	PVIF @5%	PV = Rebate amount xPVIF
0	60000	1.0000	60000.00
1	40000	0.9524	38095.24
2	40000	0.9070	36281.18
3	40000	0.8638	34553.50
PV of Rebate amount			168929.92

PVIF = 1/(1+r)^n
PVIF for year 1 = 1/(1+0.5)^1
= 1/1.05
= 0.9524
PVIF for year 2 = 1/(1+0.5)^2
= 1/1.05^2
= 0.9070
PVIF for year 3 = 1/(1+0.5)^3
= 1/1.05^3
= 0.8638

Thus NPV = PV of cash inflow - PV of cash outflow

= 168929.92 -150000

=18929.29 RM

Since NPV is positive , company should train their workers