Quem S Questions Batelco Inc. is considering two mutually exclusive projects A and 11. Each project requires an initial investment as presented in the helow table The economic life of the project A will be 6-Year's and Project I 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 (ROD) 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 240,000 470,000 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 th th The working capital will be released off and 5th 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 Hatelco Inc. accept? Why? (2 Mark) Present value (table 148-1) is given below to determine the appropriate discount factors) using the stables provided. Present Value of $1 Table Summary: Table of present value 51. Periods are listed in first column 1-15 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% Period 1 0.962 0.952 0.943 0.935 0.926 0.017 0.0000 0.001 0893 0805 2 0.925 0.907 0.890 0873 0.857 0.042 08:20 0.812 0707 0.793 0.889 0.864 0.840 0.016 0.74 0.772 0.751 0.731 0712 0.000 0.855 0,763 0.823 0.735 0.850 0.792 0.708 063 0.883 0613 0822 0.784 0.747 0.713 0.681 0.050 0.621 0.503 6.562 0.790 0.705 0.666 0506 0630 0.564 0.746 0.535 0507 0.760 0.482 0.623 0452 0.711 0.065 0547 0.513 0.583 0:467 0434 0:540 0404 0.502 0.677 0,731 0.627 0.582 0.460 0.544 0.500 0.645 0.301 0.592 0.361 0424 0.352 0.463 0.568 0.614 0.386 0.422 0.322 0.500 4 5 3 6 7 8 9 10 0,703 0.676 year of the project A and project B respectively, for investment elsewhere within the company 14% 15% GATZ 0870 6.700 0754 DAM 0.543 0480 0425 0:378 0.333 0.295 6675 0.502 0.519 0456 0400 0:351 0.300 0270 0522 CAST 01432 9376 0327 6204 0247