Question 43 Not yet answered Marked out of 1.00 Flag question 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% 9050 9010 9500 8912 Question 44 Not yet answered Marked out of 1.00 The management of Fine Electronics LLC is considering to purchase an equipment to be attached with the main manufacturing machine. The equipment will need an initial investment of OMR 41400. The useful life of the equipment is 6 years. After 6 years it will have no salvage value. The cost of capital is 8% Earning before Depreciation and Tax are as follows:- Earnings Before Depreciation and Tax (OMR) Year 1 Year 2 Year 3 Year 4 Year 5 14000 14000 162001 18400 20600 26800 Flag question Year 6 Depreciation is calculated on a straight line method and the tax rate is 25%. Evaluate the Project on the basis of NPV and choose the option below? O NPV is 27269 and the project can be accepted O NPV is 34450 and the project can be accepted O NPV is negative and the project can be rejected O NPV is 28269 and the project can be accepted