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Calculate Relevant Cash Flows for Capital Project A company in the region is planning for a new project that requires an investment in new machinery.
Calculate Relevant Cash Flows for Capital Project A company in the region is planning for a new project that requires an investment in new machinery. The cost of machinery is RO 20,000. The total expenses to transport and install the machinery will be RO 5,000. Since the machinery uses the latest technology, it will result in a reduction of overall cost by RO 10,000. The company offers free maintenance for the machinery. Savings on account of the free maintenance will be RO 1,000 every year. The annual contract requires the company to pay RO 1,500 every year for vendor support. The total life of the project will be five years and it is expected that the machinery can be disposed at the end with no salvage value. Straight-line depreciation is used by the company. The effective tax rate is 10%. 9500 9050 9010 8912
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