Annual Operating Expenses:

Fixed Costs: SAR $1\mathrm{.}875$ million including SAR $300,000$ depreciation.

Variable Costs: SAR $5\mathrm{.}625$ million in Year $1,$ expected to increase by $10\%$ annually due to scaling and inflation.

Revenue Projections:

Year $1$: SAR $3\mathrm{.}75$ million

Year $2$: SAR $9\mathrm{.}375$ million

Year $3$: SAR $15$ million

Year $4$: SAR $22\mathrm{.}5$ million

Year $5$: SAR $33\mathrm{.}75$ million

Salvage Value:

SAR $3\mathrm{.}75$ million at the end of Year $5,$ representing the residual value of the machinery and technology.

Specific Tasks for Students:

a$.$ Cash Flow Projections:

Develop detailed annual cash flow projections for the next $5$ years. Include the initial investment, expected revenues, comprehensive operating expenses, and consider the salvage value at the end of Year $5.$ Assume that tax and zakat are not applicable and should be ignored in these calculations.

b$.$ Investment Appraisal:

Net Present Value $($NPV$)$: Calculate the NPV using a discount rate of $10\%.$

Internal Rate of Return $($IRR$)$

Modified Internal Rate of Return $($MIRR$)$

Payback Period: Assume that target payback period is $4$ years

Discounted Payback Period: Assume that target discounted payback period is $4$ years

Accounting Rate of Return $($ARR$)$

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c$.$ Recommendation and Conclusion:

Should AlNoor Lighting Co$.$ proceed with the expansion into the smart lighting market based on the financial analyses. Provide a comprehensive recommendation using the results from the investment appraisal techniques.

Deliverables

Students are required to submit a detailed report in M$.$S$.$ Excel file format through Blackboard. The report should clearly display the cash flow projections, and the calculations for NPV$,$ IRR, MIRR, Payback Period, Discounted Payback Period, and ARR. Additionally, the report should present financial analysis and recommendations.