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):
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter2: The Accounting Information System
Section: Chapter Questions
Problem 64.1C
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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
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