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 5-Year's and Project B will be 6 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 maximumn 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 Projects B Cost of equipment 240,000 470,000 Working Capital needed 60,000 80,000 Overhaul of the equipment in two years 12000 14000 Annual revenues and costs: 375,000 300,000 Sales revenues 90,000 180,000 Variable expenses 78.333 48,000 Depreciation expense 6 years The working capital will be released 5th and 6th 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 DQ 10 Perriod 7 6 T mi 4 4% 10.962 |0925 0.880 0.855 0.8.22 0.790 0760 0.731 0.703 0.676 5% 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0985 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 1%%% 0.917 0.842 0.772 1.708 0.550 0.596 0.54 0.502 0.460 0.422 10% 0.909 0.826 0.751 10.683 0.621 0564 0.513 0.424 0.386 11% 0.901 0.812 0.731 0.65g 0.593 0.535 0.482 0.434 0.391 0.352 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 13% 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.205 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 15% 0.870 0.756 0.658 0.572 0.497 0.432 10.376 0.327 0.284 0.247