q5

3. Nizwa Plastic Manufacturing Company is considering replacing two of its machines for a newer and more efficient machine. The two machines can be currently sold for a total fair market value of OMR 70,000 (with no salvage value). The new machine can be installed for OMR 530,000 and it has a useful life of 7 years with a salvage value of OMR 60,000. The annual depreciation for each of the seven years is as follows: OMR 35,000 for the first two years, OMR 45,000 for the 3rd year..OMR 17,000 for the next two years, and OMR 15,000 for the each of the remaining years. The new machine is expected to lower labor costs by OMR 275,000. Annual maintenance costs of OMR 60, which were being paid before the purchase will decrease by 75%. The company's corporate tax rate is 25%. Calculate the incremental cash inflows over the seven years and the initial cash outflow at year 0