Salalah Steel SAOG was about to decide whether to launch a new product In year 2002...

 

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Salalah Steel SAOG was about to decide whether to launch a new product In year 2002 sale price per unit is OMR 10 and is expected to increase by 10% every year due to inflation. In year 2002 expenses per unit is OMR 5 and is expected to increase by 5% every year. There are no other production expenses. Number of units sold in year 2002, 2003 and 2004 are: 120, 800, 700. An investment of OMR 3000 would be needed to install new machinery to be completed and paid for in 2001. The machinery will be depreciated over three years using MACRS After 2004 the product would be withdrawn from the market. The machinery will be sold for 500 at the end of 2004. The rate of interest is 10%. Assume taxes to be 30%. Calculate sales in year 2003 Calculate depreciation in year 2003 Calculate net present value. Salalah Steel SAOG was about to decide whether to launch a new product In year 2002 sale price per unit is OMR 10 and is expected to increase by 10% every year due to inflation. In year 2002 expenses per unit is OMR 5 and is expected to increase by 5% every year. There are no other production expenses. Number of units sold in year 2002, 2003 and 2004 are: 120, 800, 700. An investment of OMR 3000 would be needed to install new machinery to be completed and paid for in 2001. The machinery will be depreciated over three years using MACRS After 2004 the product would be withdrawn from the market. The machinery will be sold for 500 at the end of 2004. The rate of interest is 10%. Assume taxes to be 30%. Calculate sales in year 2003 Calculate depreciation in year 2003 Calculate net present value.

Answer rating: 100% (QA)

1 Sales in year 2003 Year 2003 sale price per unit Year 2002 price 1 Inflation rate 1 OMR 10 1 01 1 ... View the full answer