NewWorld SAOG is planning to replace its old machine with a new model machine. The company can choose one from the two models available in the market( Model T or Model G) with an equal investment of OMR 510000. The additional cost of utilities of Model T and Model G are OMR120,000 and OMR160000 respectively. The old machine can be sold for OMR 95000. The earnings from Model T and Model G are expected to be : Year 1 2 3 4 5 Model T 200,000 140,000 190,000 190,000 230,000 Model G 170,000 190,000 90,000 110,000 75,000 The cost of capital is 9%. At the end of fifth year the machine T and Machine G can be sold for OMR 25,000 and OMR 35,000 respectively. You are required to suggest the best option from the options below Since Model T and Model G have negative NPV , both machines will be rejected Both Model G and Model T can be selected Only Model G has an positive NPV of OMR 213370 therefore Model G can be chosen Only Model T has an positive NPV of OMR 213370 therefore Model T can be chosen

NewWorld SAOG is planning to replace its old machine with a new model machine. The company can choose one from the two models available in the market( Model T or Model G) with an equal investment of...

NewWorld SAOG is planning to replace its old machine with a new model machine. The company can choose one from the two models available in the market( Model T or Model G) with an equal investment of OMR 510000. The additional cost of utilities of Model T and Model G are OMR120,000 and OMR160000 respectively. The old machine can be sold for OMR 95000. The earnings from Model T and Model G are expected to be :

Year	1	2	3	4	5
Model T	200,000	140,000	190,000	190,000	230,000
Model G	170,000	190,000	90,000	110,000	75,000

The cost of capital is 9%. At the end of fifth year the machine T and Machine G can be sold for OMR 25,000 and OMR 35,000 respectively.

You are required to suggest the best option from the options below

Since Model T and Model G have negative NPV , both machines will be rejected

Both Model G and Model T can be selected

Only Model G has an positive NPV of OMR 213370 therefore Model G can be chosen

Only Model T has an positive NPV of OMR 213370 therefore Model T can be chosen

Jun 07, 2022

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NewWorld SAOG is planning to replace its old machine with a new model machine. The company can choose one from the two models available in the market( Model T or Model G) with an equal investment of...

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