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 (IO):
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 (IO):
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7d8a8885-ee1a-47c0-9480-e7cae2934742%2Fbd3f1df7-b5fe-4931-9fc6-7900b5624a66%2F16x5fxd_processed.png&w=3840&q=75)
Transcribed Image 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):
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 =](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7d8a8885-ee1a-47c0-9480-e7cae2934742%2Fbd3f1df7-b5fe-4931-9fc6-7900b5624a66%2Fyfagy2_processed.png&w=3840&q=75)
Transcribed Image 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 =
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