Al-Amal Company is planning to replace its old equipment and obtained two quotations for Model A and Model B. Model A has an initial cost of OMR 150,000 with additional power cost of OMR 30,000. Model A will have a salvage value of OMR 25,000 at the end of its four years useful life.

Model B has an initial cost of OMR 140,000 with additional power cost of OMR 20,000. Model B will have a salvage value of OMR 35,000 at the end of its four years useful life.

The old equipment can be sold for OMR 30,000.

Al-Amal Company has 9% cost of capital.

The expected earnings from Mosel A and Model B are as follow:

Year	1	2	3	4
Model A	45,000	40,000	35,000	30,000
Model B	50,000	45,000	30,000	25,000

1. Calculate the net cash outflows of Model A

a) OMR 210,000

b) OMR 360,000

c) OMR 220,000

d) OMR 150,000

2. Calculate the net cash outflows of Model B
3. a) OMR 190,000
4. b) OMR 280,000
5. c) OMR 130,000
6. d) OMR 310,000

3. What is NPV of Model A?
4. a) OMR -26,795
5. b) OMR -9,095
6. c) OMR 8,000
7. d) OMR 198,900

4. What is NPV of Model B?
5. a) OMR 20,000
6. b) OMR 8,760
7. c) OMR 5,400
8. d) OMR 20,455

5. Which model you suggest Al-Amal Co. to buy?
6. a") Model B
7. b) Both Model A and Model B
8. c) Model A
9. d) Neither Model A nor Model B