Rose Company is considering a new project with an estimated cost of OMR 100,000 at time zero. Rose Company required rate of return is 12%. Operating cash inflows, excluding depreciation, and before taxation, are OMR 75,000 and OMR 65,000 for year 1 and 2 respectively. However, these are expected to rise by 4% pa because of inflation. The tax rate is 15%.

1. Using the discounting money cash flows (nominal method), what is the net present value of the above project (rounded to the nearest OMR)?

a-OMR 25,686

b-OMR 25,155

c-OMR 25,686

d-OMR 125,686

2. Calculate the real interest rate. (rounded to the nearest percentage)

a-116%

b-9.3%

c-8%

d-11.6%

3. Using the discounting real cash flows (real method), what is the net present value of project A (rounded to the nearest OMR)?

a-OMR 25,155

b-OMR 25,686

c-OMR 125,155

d-OMR 25,155

4. What is cash flow after tax for the first year?

a-OMR 12,750

b-OMR 62,750

c-OMR 71,250

d-OMR 21,250

5. Calculate the after tax NPV of the project (to the nearest OMR)

a-OMR 71,222

b-OMR 113,638

c-OMR 31,638

d-OMR 13,638