Halo Telecom sells telecommunication products and services to a variety of small businesses. Two of Halos key clients are Square and Cloudburst, both fast -growing technology start-ups located in Cyberjaya. Halo has compiled information regarding its transactions with Square and Cloudburst for 2020, as well as its expectations regardin g their interactions over the next 3 years:

	Expected Annual Percentage			2020
		Increase
	Square		Cloudburst	Square (RM)		Cloudburst
						(RM)
Sales revenue	6%		5.5%	567,000		3,510,000
Cost of sales	5%		4.5%	364,800		3,060,000
Net cash flow				202,200		450,000

Halos transactions with Square and Cloudburst are in cash. Assume that they occur at year-end. Halo is headquartered in Kuala Lumpur and pays no income taxes. The owners of Halo insist on a required rate of return of 12%.

	Year 1	Year 2	Year 3
PV factor for 12%	0.893	0.797	0.712

Required:

a) What is the expected net cash flow from Square and Cloudburst for the next 3 years?

(4 marks)

2. Based on the net present value from cash flows over the next 3 years, is Cloudburst or Square a more valuable customer for Halo? Justify your answer with net present value computation.

(3 marks)

3. Cloudburst threatens to switch to another supplier unless Halo gives a 10% price reduction on all sales starting in 2021. Calculate the 3-year NPV of Cloudburst after incorporating the 10% discount. Should Halo continue to transact with Cloudburst?

(3 marks)

d) What other factors should it consider before making its final decision? Discuss.

(3 marks)