Explansion​ Project: ABC is planning to buy a new heavy duty printing machine. You were hired to assist KFUPM on this decision. So you gathered the following information. The new machine has a life of...


Explansion​ Project:

ABC is planning to buy a new heavy duty printing machine. You were hired to assist KFUPM on this decision. So you gathered the following information. The new machine has a life of 3 years.



New​ Machine:

Life of​ machine: 3 years

The cost of the new machine is SAR 1,134

The machine will increase the gross profit every year by SAR 314

The market value of the machine when sold at the end of its life is SAR 191

If​ replaced, then the net working capital​ (NOWC) will increase every year by SAR 22

ABC will recover all investments in working capital at the end of the new​ machine's life​ (after 3​ years).


WACC is
9.49​%


Tax rate is​ 40%

ABC uses​ straight-line Depreciation.

Calculate the​ follwoing:



​Notes:

1. Use 2 Decimals





Depreciable base SAR is<br>A1. New Machine:<br>Yearo<br>Year1<br>Year2<br>Year3<br>NOPAT + Dep.<br>A2. Cash Flows from Working Captial (WC):<br>Yearo<br>Year1<br>Year2<br>Year3<br>(-) change in NOWC*<br>*make sure to put the correct sign<br>A3. Cash Flows from the Initial Outlay (10):<br>Yearo<br>(-) 1O*<br>*make sure to put the correct sign<br>

Extracted text: Depreciable base SAR is A1. New Machine: Yearo Year1 Year2 Year3 NOPAT + Dep. A2. Cash Flows from Working Captial (WC): Yearo Year1 Year2 Year3 (-) change in NOWC* *make sure to put the correct sign A3. Cash Flows from the Initial Outlay (10): Yearo (-) 1O* *make sure to put the correct sign
A3. Cash Flows from the Initial Outlay (I0):<br>Yearo<br>X<br>X<br>(-) 1O*<br>*make sure to put the correct sign<br>A4. Cash Flows from Terminal Cash Flows (TCF):<br>X<br>X<br>Year3<br>TCF*<br>X<br>*make sure to put the correct sign<br>A5. Free Cash Flows:<br>Yearo<br>Year1<br>Year2<br>Year3<br>FCF*<br>*The sum of A1-A4<br>D. NPV =<br>

Extracted text: A3. Cash Flows from the Initial Outlay (I0): Yearo X X (-) 1O* *make sure to put the correct sign A4. Cash Flows from Terminal Cash Flows (TCF): X X Year3 TCF* X *make sure to put the correct sign A5. Free Cash Flows: Yearo Year1 Year2 Year3 FCF* *The sum of A1-A4 D. NPV =

Jun 10, 2022
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