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 300,000 with additional power cost of OMR 60,000. Model A will have a salvage value of OMR 50,000 at the end of its four years useful life. Model B has an initial cost of OMR 280,000 with additional power cost of OMR 40,000. Model B will have a salvage value of OMR 70,000 at the end of its four years useful life.

The old equipment can be sold for OMR 60,000. 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 (OMR per year)	90,000	80,000	70,000	60,000
Model B (OMR per year)	100,000	90,000	60,000	50,000

1. Calculate the net cash outflows of Model A and Model B respectively.

a-Model A: OMR 360,000 and Model B: OMR 320,000

b-Model A: OMR 300,000 and Model B: OMR 260,000

c-Model A: OMR 420,000 and Model B: OMR 380,000

d-Model A: OMR 220,000 and Model B: OMR 280,000

2. What is NPV of Model A?

a-OMR 18,190

b-OMR 8,000

c-OMR 198,900

d-OMR -18,190

3. What is NPV of Model B?

a-OMR 206,455

b-OMR 20,000

c-OMR 38,760

d-OMR 38,760

4. Which model you suggest Al-Amal Co. to buy?

a-Model B

b-Both Model A and Model B

c-Model A

d-Neither Model A nor Model B