DBSC is planning to invest in a special system to deliver local money transfer services to its

customers. The invoice price of the system is Br.280,000 subject to 15% non-refundable VAT. It

would require Br.18,000 in shipping expenses and Br.25,000 in installation costs. The system

will be depreciated using straight line method with 25% annual rate on original cost of the

system. DBSC plans to use the system for four years and it is expected to have a salvage value of

Br.80,000 after four years of use. The bank expects the system will increase the number of local

money transfer customers by 100,000. The company estimates that it will charge on the average

Br.5 fee per customer for the transfer service in the first year with a cost of Br.3 per customer,

excluding depreciation. Management forecasts that both the service fee and cost per customer

will increase by 10% per year due to inflation. DBSCs net operating working capital would have

to increase by 18% of fees earned to deliver the transfer service. The bank is subject to 30%

income tax.