1. Salalah company is planning to replace its old machine with a new model machine. Company can choose one from the two models available in the market (Model X or Model Y) with an equal investment of OMR 400,000. The additional cost of utilities of Model X and Model Y are OMR100,000 and OMR90,000 respectively. The old machine can be sold for OMR 50,000. The earnings from Model X and Model Y are expected to be: Year 2 3 Mode1x 190.000 180.000 . 150.000 Modely 200.000 180.000 185.000 The cost of capital is 10%. At the end of third year the machine X and Machine Y can be sold for OMR30,000 and OMR40,000 respectively. You are required to evaluate and suggest the best option by using NPV method. (Pr@10% T/.9097.12.8264,73.7573, 94.6830) 1 2. Answer both the questions (a) and (b) a) Power Company is considering building which will require the purchase of a building for OMR 400,000 at time zero. The scrap value at the end of its useful life is RO 40,000. Corporation tax, at a rate of 10% of taxable income, is payable. Cash flows before depreciation are forecast to be: Time (year) 2 Cash flows 400,000 300,000 250,000 However, these are expected to rise by 5.0% pa because of inflation. The firm's cost of capital is 12%. Evaluate and find the discounted Payback period by, Discounting money cash flows. (P@10.11.5929, 19.7970.137118 b) A project requires an initial cash outflow of RO 50,000. The cash inflows before tax for 4 years are RO30,000, RO20,000, RO10,000, RO40,000. Corporation tax, at a rate of 5% of taxable income, is payable. The firm's cost of capital is 12%. Calculate, Payback period, Discounted Pay-back period and NPV. Compare between the first two results as a manager which one you will select and why? (PV@12% 11.8929, Y2.7972, 73.7118)