4 3. Watten Company has its profit after taxes for new investment proposal for four years as shown below. Assume that the initial investment is OMR 50,000, Salvage value is OMR 10,000. Income statement Details 12 3 Revenues 50,000 54,000 58,400 60,240 Cost of goods sold 20,000 22,000 24,200 26,620 Gross profit 30,000 32,000 34,200 33,620 Operation expenses 15,000 16,500 18,150 19,965 Depreciation 10,000 8,000 6,400 5,120 EBIT 5,000 7,500 9,650 8,535 Interest 2,000 3,400 4,700 5,938 3,000 4.100 4,950 2.597 Taxes 50% 1,500 2,050 2,475 1,299 Net Earnings /PAT 1,500 2,050 2,475 1,299 According to above information, evaluate new investment proposal and provide your analyses on acceptance decision by using below mentioned methods. a) Accounting Rate of Return (ARR), if desired rate of return 12%. b) Discounted Payback Period, if the pre-determined payback period 3 years. 4.Calculate the cash flows for each year's separately: Time (year) 1 2 3 4 Sales 100,000 150,000 200,000 300,000 Cost of goods 40%, operating expenses 20%, all from Sales. Depreciation 5000 every year, Tax 10%