10 points Save Away Question Batelco Inc. is considering two mutually exclusive projects A and B. Each project requires an initial investment as presented in the below table. The economic life of the project A will be 6-Year's and Project B will be 5 years, and both projects carry same risk. Batelco Inc uses a discount rate of 12%. After considering the current economic situation Batelco Inc. has set a maximum payback period of 4 years and minimum return on investment (ROI) 18%. A financial analyst, prepared estimates of the annual revenues and costs associated with each project as in the below table: Projects A 240,000 Projects B 470,000 Cost of equipment Working Capital needed Overhaul of the equipment in 60,000 80,000 12000 14000 two years Annual revenues and costs: Sales revenues 375,000 300,000 Variable expenses 180,000 90,000 Depreciation expense 60,000 74,000 Fixed out-of-pocket operating 90,000 70,000 costs Life of Project 6 year 5 years The working capital will be released 6th and 5th year of the project A and project B respectively, for investment elsewhere within the company. Required: 1. Calculate the net present value for each project. (4 Marks) 2 Calculate the simple rate of return for each product. (4 Marks) 3. Which of the two projects (if either) would you recommend that Batelco Inc. accept? Why? (2 Mark) Present value (table 14B-1) is given below to determine the appropriate discount factor(s) using the tables provided. Life of Project 6 year 5 years The working capital will be released 6th and 5th year of the project A and project B respectively, for investment elsewhere within the company. Required: 1. Calculate the net present value for each project. (4 Marks) 2. Calculate the simple rate of return for each product. (4 Marks) 3. Which of the two projects (if either) would you recommend that Batelco Inc. accept? Why? (2 Mark) Present value (table 14B-1) is given below to determine the appropriate discount factor(s) using the tables provided. Table 148-1 Present Value of $1 Table Summary Table of present value $1. Periods are listed in first column 1-15 11% 13% 5% 6% 7% 10% 8% 9% Period 1 4% 0.962 0943 0.885 0.935 0.952 0.909 0.926 0.901 0.917 0.812 0.783 0.826 2 0.925 0.907 0.873 0.890 0.857 0.842 0.889 0.751 0.693 0.864 0.816 0731 0.840 0.794 0.772 0.613 0.855 0.823 0.763 0.659 0.792 0.735 0.683 0.708 0.822 0.021 0.543 0.713 0.784 0.593 0.691 0650 0.747 0.790 0.564 0630 0.746 0.000 0.480 0.535 0.596 0.705 0.665 0.760 0.623 2.711 0.583 0.513 0.547 0.482 0.425 0.540 0.502 0627 0.582 0.467 0.370 0677 0.731 0.434 0424 0.703 0.500 0645 0.391 0.333 0.544 0.592 0.400 0.508 0.463 0.386 0614 0.558 0.422 0.352 0.295 0.676 3 4 5 6 7 . 10 12% 0.893 0.797 0.712 0.636 0.567 0.507 0452 0404 0.361 0.322 14% 0.877 0.709 0.675 0.592 0.519 0456 0.400 0.351 0.300 0.270 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0264 0.247