Question
Muscat Co. has decided to sign a proposal to purchase new baking machinery. It contains the following data: 4-year useful life Yearly maintenance costs are
Muscat Co. has decided to sign a proposal to purchase new baking machinery. It contains the following data:
4-year useful life
Yearly maintenance costs are currently OMR 4,000 and will increase by OMR 1,600 if the machine is purchased.
OMR 85,000 salvage value
The company will save OMR 375,000 each year in labor costs if the new machine is purchased.
The related tax rate is 12%
1,600 will be necessary to install the new machine.
The machine will depreciate by OMR 32,000 (years 1 and 2) and OMR 30,000 (year 3) and OMR 20,000 for all remaining years.
Purchase cost for the machine is OMR 500,000.
Total initial cash outflow for Year 0 is:
Select one:
a. 504,000
b. 505,600
c. 501,600
d. None of the answers are correct
e. 500,000
_____________________
Muscat Co. is considering purchasing a new building for its administration. The new building will require an initial investment after-tax cost is OMR 5,000,000 and is expected to provide after-tax operating cash inflows of OMR 1,800,000 in year 1, OMR 1,900,000 in year 2, OMR 1,700,000 in year 3, and OMR 1,300,000 in year 4?
Additional info:
Net Present Value (NPV) assume that the cost of capital is 15%.
Select one:
a. None of the answers are correct
b. OMR 1,700,000
c. - OMR 137,053
d. OMR 371,764
e. - OMR 4,862,947
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