A B C D E G Question 5 10 Marks 25 Minutes 2 Angle Inc. is a production company with four investment opportunities available to its manager, Adam for the 2022 year. Below outlines these opportunities: 3 4 5 Project Investment Annual Earnings 6 Alpha 1,000,000 $ 200,000 7 Omega 2,000,000 250,000 8 Theta 3,000,000 350,000 9 Epsilon 500,000 S 125,000 10 11 REQUIRED 12 A) Adam is currently evaluated based on his Return on Investment (ROI). (2 marks) 13 i) If the required rate of return is 15%, which projects would be accepted? 14 ii) If they can only choose one project, which would they choose? 15 B) Angle Inc. has decided to change its investment stategy to focus on Residual Income analysis. Which project should Adam choose under these new requirements if the company requires a 16 minimum required return of 11%? (2 marks) 17 C) Donny, a manager in another investment centre, has presented Adam with a new 5 year project opportunity to replace one of the factory machines. The details of this investment are 18 below: 19 Cost of new machine S 150,000 20 Useful life of the new machine 5 years 21 Salvage value of the old machine 10,000 22 un Salvage value of new machine 20,000 23 24 Additional information: 25 The new machine has an automation feature that will eliminate the need of one factory worker, saving $37,000 per year in salary. 26 Annual repairs would be required for the machine at a cost of $7,500 per year. The old machine did not require any maintenance costs. 27 Angle Inc. has a cost of capital for new projects of 13%. 28 29 Calculate the Net Present Value of this project. Should this new project be pursued? (6 marks) 30 31 32