Replcement Project:

KFUPM is planning to replace it heavy duty printing machine with a newer model that is faster and better quality. The existing machine has a life of $5$ years and $2$ years of them has passed. Now KFUPM is eval machine with the newer model which has a life of $3$ years. KFUPM hired you to analyze the proposed replacement and you collected the below information.

New Machine:

Life of machine: $3$ years

The cost of the new machine is SAR $1,158$

The machine will increase the gross profit every year by SAR $307$

The market value of the machine when sold at the end of its life is SAR $204$

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

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

Old Machine:

Life of machine is $5$ years. $2$ years has past. Effective remaining life of the machine is $3$ years.

Orginal cost of the existing machine is SAR $874$

Total depreciation of the past $2$ years is SAR $349\mathrm{.}6$

If KFUPM decided to go with the replacement proposal, then the existing machine can be sold right now at SAR $208$

The market value of the machine when sold at the end of its life is zero $(3$ years from today$)$

WACC is $9\mathrm{.}11\%$

Tax rate is $40\%$

Both machines use straight$-$line Depreciation.

Calculate the follwoing:

Notes:

Use $2$ Decimals

It is advisable to solve the question using Excel or on paper, and then put your relevant answers here:

Depreciable base SAR is

A$1.$ New Machine:

NOPAT $+$ Dep.

Yearo Year$1$

$$

A$2.$ Cash Flows from Working Captial $($WC$)$:

$\backslash$table$[[,$Yearo,Year$1,$Year$2],[(-)$ change in NOWC$*,,0,0]]$

A$3.$ Cash Flows from the Initial Outlay $($IO$)$:

$\backslash$table$[[$Yearo$],[(-){10}^{**},$