1. Liv Enterprises is considering a national launch of 2 corn chip products under project A and B. The national launch will require the following investments:

Additional manufacturing equipment; Project A: K900,000.00 and Project B: K1,000,000.00

Upgrading existing facilities; Project A: K100,000.00 and project B: K400,000.00 Both of the above would be paid for at the outset and would be depreciated in the accounts over a five year period using straight line with a residual value for both Project A and B of zero.

Projected revenues and costs over a period of five years are given in table below:

PROJECT A
YEAR	REVENUE	COSTS
1	K1200000	1340000
2	K2000000	K1670000
3	K2000000	K1520000
4	K2250000	K1685000
5	K2250000	K1685000
PROJECT B
YEAR	REVENUE	COSTS
1	K1300000	K1460000
2	K2100000	K1520000
3	K2200000	K1400000
4	K2400000	K160000
5	K2500000	K1720000

Required:

(i) Appraise the two projects through the use of Accounting Rate of Return and suggest which of the two offers a better option. Please note that the above costs do not include depreciation.

(ii) results increasingly suggest that Discounted Cash Flow (DCF) techniques are a better way to appraise investment projects as compared to payback method. Summarize reasons why this might be so.

2. In the procurement agreements so signed in question 1 above, explain and give four legal reasons through which these 2contracts can be discharged or terminated.