QUESTION 4 (25 MARKS) Ameera, a divisional manager for Tunas Holdings has an opportunity to manufacture and sell one of two new products for a five-year period. Her annual pay raises are determined by her division's return on investment (ROI), which has exceeded 18% each of the last three years. She has computed the cost and revenue estimates for each product as follows: YTK (RM) PMX (RM) Initial investment: Cost of equipment (zero salvage value) 170,000 380,000 Annual revenues and costs: Sales revenues Variable expenses Depreciation expenses Fixed out-of-pocket operating costs The company's discount rate is 16%. 250,000 120,000 34,000 70,000 350,000 170,000 76,000 50,000 Required: a) Compute the payback period for each product. (4 marks) (CLO3:PLO8:C5) b) Compute the net present value for each product. (10 marks) (CLO3:PLO8:05) c) Compute the internal rate of return for each product. (3 marks (CLO3:PLO8:05) d) Calculate the project profitability index for each product. (3 marks) (CLO3:PLO8:05) e) Calculate the simple rate of return for each product. (3 marks) (CLO3:PLO8:05) f) Determine with reason which of the two products should Ameera's division pursue. (2 marks) (CLO3:PLO8:C5) APPENDICE Table A-3 Present Value Interest Factors for One Dollar Discounted atk Percent for n Periods: PVIF v = 1/(1+k" Period 1 2 3 4 5 15 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 20% 29% 25% 30% 0.9901 0.98040.9709 0.9615 0.95240.94340.9346 0.9259 09174 0.9091 0.90090.8929 0.8850 0.8772 0.8696 0.8621 0.8333 0.80650.8000 0.7692 0.9803 0.9612 0.9426 0.9246 0.070 0.8900 0.8734 0.8573 0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 0.75610.7432 0.64 0.6504 0.0000 0.5917 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6575 0.6407 0.5787 0.52450.5120 0.4552 0.9610 0.92380.8895 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.66300.6587 0.5355 0.61330.5921 0.57180.55230.4.23 0.4230 0.4096 0.3501 0.9515 0.9057 0.9628 0.8219 0.7836 0.7473 0.7130 0.6806 0.6499 0.6209 0.5805 0.5674 0.54280.5194 0.4972 0.47610.4019 0.3411 0.327102893 6 7 8 0.94200.8880 0.8375 0.7903 0.7462 0.7050 0.6863 0.63020.5963 0.56450.5346 0.5066 0.4803 0.4556 0.4323 0.4104 0.3349 0.2751 02621 02072 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 05132 0.4817 0.45230.42510.3996 0.37590.3538 02791 0221802097 0.1594 0.9235 0.8535 0.78940.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4399 0.4099 0.37620.35060.3269 0.305002326 0.1789 0.1678 0.1226 0.9183 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.39090.3606 0.3329 0.3075 0.2843 0.26300.1938 0.1443 0.1342 0.0943 0.9063 0.82030.7441 0.67560.6139 0.5684 0.5060 0.4632 0.4224 0.3855 0.35220.32200.2946 0.2897 0.2472 0.2287 0.1615 0.11540.9074 0.0725 9 10 11 12 13 14 15 0.8563 0.8043 0.7224 0.5496 0.5847 0.5268 0.4751 0.1289 0.3875 0.3505 0.317302875 0.2507 0.2366 0.2149 0.1954 0.134600938 0.0859 0.0558 0.8874 0.7885 0.70140.6246 0.5668 0.4970 0.4440 0.3971 0.3565 0.3186 0.2858 0.2567 0.2307 0.2078 0.1869 0.1685 0.11220.0757 0.0687 0,0629 0.8787 0.77309.68100.6006 0.368 0.4688 0.4150 2.3877 0.326202897 0.2575 0.2292020420.18210.1625 0.1452 2.0935 0.06100.0550 2.0330 0.8700 0.75790.6611 0.5775 0.5051 04423 0.3878 0.3405 0294202633 0.2320020460.1807 0.1587 0.1413 0.125200779 0.0452 0.9440 0.0254 0.8613 0.7430 0.64190.5553 0.481004173 0.3824 0.3152 0274502394 0.20900,18270,1599 0.1401 0.1229 0.1079 0.0649 0.0397 0.0052 0.0195 16 17 18 0.8528 0.72840.62320.5399 0.45810.3936 0.3387 0.299 0.2519 02176 0.1883 0.1631 0.1415 0.1229 0.1069 0.0930 0.0541 0.0320 0.0281 0.0150 0.8444 0.71420.6050 0.5134 0.0063 0.3714 0.31660.27000 2311 0.1978 0.1696 0.1456 0.12520.10780.0929 0.0002 0.0451 0.025 0.0225 0.0116 0.8360 0.7002 0.5874 0.4936 0.4156 0.3513 0.2459 0.2502021200.1799 0.15280.13000.11080.1946 0.0808 0.0691 0.0376 0.0208 0.0180 0.0089 0.8277 0.6864 0.5703 0.4746 0.3957 0.3366 0.2765 023170.1945 0.1635 0.1377 0.1161 0.09810.08290.0703 0.0596 0.0313 0.0168 0.0144 0.0068 0.8195 0.67300.5537 0.4564 0.3769 0.3118 0.2564 02145 0.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0811 0.0514 0.0261 0.0135 0.0115 0.0053 19 20 21 22 23 24 25 0.81140.6598 0.5375 0.4528 0.354902842 02415 0.1987 0.1637 0.1351 0.111700826 0.076 0.0638 0.05310.0443 0.0217 0.01090.0082 0.0040 0.80040.5468 0.5219 0.42200.3418 0.2775 0.2257 0.18390.1562 0.12280.1007 0,0828 0.0680 0.06600.0462 0.0982 2.0181 0.0028 0.0074 0,0001 0.7964 0.63420.5067 0.4057 0.32560.2618 0.21090.1703 0.1378 0.1117 0.0907 0.0738 0.0601 0.0491 0.0402 0.0329 0.0151 0.0071 0.00690.0024 0.7875 0.6217 0.4919 0.3901 0.3101 0.2470 0.1971 0.1577 0.12540.1015 0.0817 0.0659 0.06120.0431 0.0049 0.02840.0128 0.0057 0.0047 0.0018 0.7798 0.0095 0.4776 0.3751 0.2950 0.2330 0.1842 0.14600.1160 0.0923 0.07360.0548 0.0471 0.0378 0.0004 0.0245 0.0105 0.0046 0.0038 0.0014 . 30 35 36 . 0.7419 0.5821 04120 0.3083 0.2014 0.1741 0.13140.099400754 0.0573 0,047 0.0334 0.025 0.0196 0.0151 0.0116 0.002 0.0016 0.0012 0.7069 0.50000.3554025040.1813 0.1301 0.0937 0.0676 0.0490 0.0356 0.025 0.0189 0.0139 0.0102 0.0075 0.0065 0.00170.0005 0.6989 0.49020.3450 0.2407 0.1721 0.1227 0.0875 0.0628 0.044900323 0.0234 0.0169 0.0123 0.0089 0.0065 0.0048 00014 0.6717 0.4529 0.3086 0.2083 0,1420 0.0972 0.0668 0.0480 0.0318 0.0221 0.0154 0.0107 0.0075 0.0050 0.0037 0.0028 0.0007 0.000 0.3715 0.2281 0.1407 0.0872 0.06490.0039 0.0213 0.0134 0.0025 0.0054 0.0035 0.0022 0.0014 0.0000 0.0005 . . . . -- 50 . Table A4 Present Value Interest Factors for a One-Dollar Annuity Discounted atk Percent for n Periods: PVIFA = [1 - 1/1 + k/jik Period 1-3 1% 2% 3% 45% %% 10% 11% 12% 13% 14% 15% 16% 20% 24% 25% 30% 0.9901 0.916040.9709 0.9615 0.6240564093450.5259 091740.9191 0.000 0.8929 0.88500STD 0.8896 0.8621 0.60 0.8065 0.80000.7892 1.9704 1.9416 1.9135 18861 1.8994 1.89341.9080 1.7833 1.1991 1.7355 1.7125.8901 1.5681 1.8467 1.6257 1.6052 1.5278 1.4568 1.4400 1.3809 2.9410 28639 28286 2.7751 27732 26730 2520 25771 2531324169 2487 24018 2361221216 22882 22459 21065 198131.9520 1.816 3.912038077 3.7171 3.6299 3.5460 3.4651 3.3072 3,3121 32297 3.1699 3.1024 3.0373 2.9745 29137 28550 2.7982 25887 24043 2.3616 21662 4.85344.71354.5797 4.4518 4.3295 421244.10023.94273.8897 3.7908 3.6869 2.60483.5172 34301 2.3522 32703 29906 27454 2.6893 24356 3 4 5 6 7 8 9 5.7956 5.60145.4172 52215.0757 491734.7565 4.62294.48594.3553 47305411143.9975 3.887 3.7845 3.6847 3.3255 3.0216 29514 26427 6.72626.4720623136.0021 3.78645.5824 53890 52064500304.8684 4.7122 45638 1.4226 42883 416044.0386 3.604832423 3.1611 28021 7.6517732567.01976.7327 6.4632 62098 59713 5.7456 55348 5334951961 19676 4.7968 46389 4.4873 43136 3.6372 21212 3.3289 29247 8.5660 8.16227.78617.4953 7.1078 6.80176.5152 6.2489 5.99525.7590 5.5370 53212 5.1317 4.945447716 4.6065 4.00103.5655 3.4631 3.0190 9.47138.96288.53122.1909 7.72177.3801 7.0236 6.71016.4716.146 5.8892 5.6512542625.21615.0188 48382 4.1925 2.6819 3.5705 3.1915 10 11 12 13 10.368 9.786892526 8.76068.30647.88597.467 7.1390680526.4451 62065 5.99775.6869 5.4527 52337 5.0286 4.3271 3.77573.6664 3.1473 11.256 10.575 9.9640 9.3851 8.5830 8.38587.9427 7.50617.16076.8137 6.49246.1945.9178 5.60035.4216 5.1971 1.2992385143.7251 3.1903 12.134 11.343 10.6359.9856 9.9938.85278.3577 7.90387.289 7.10346.7696.2356.12185542455831 5.3423 45327391243.780132233 13.004 12.10 11.296 10.563 9.999 9.29508.7456 8.24427.78627.3667 6.98196.62126.3125 6.0021 57245 5.4675 4.6106 3.9616 3.8241 32497 13.865 12849 11.938 11.11810.380 9.71229.10798.5595 8.08077.6061 7.19096.8109 6.4624 6.1422 5.8474 5.5756 4.6755 4.0013 3.8599 3.2682 14 15 16 17 18 19 20 14.718 13.578 12.561 11652 10.698 10.106 9.4466 8.85148.3126782377.3792 697406.6039 6.2651 5.9542 5.6685 4.72964.09333.887432832 15.562 14.292 13.186 2166 1.274 10.471 9.7680 9.1216 8.543680216 7.54882.11966.72916.37296,04725.748747745 4.0501 3.9080 3.2943 16.398 14.992 13.754 12.659 1.690 10828 10.0599.3719 8.75568.2014 7.7016 72497 6.8399 6.4674 6.1280 5.8178 4.8122 4.0799 3.92793.3097 17.226 15.6781432413.134 12.085 1.15810.336 9.60988.950143649 7.8580736586.9380 6.55046.192 5.8775 48405 409673912433105 18.046 16.351 14.877 13.59012062 11.470 10.549.81819.1285 9.51387.96337.8694 7.0248 6.6231625935.92889 4.8696411033.959933198 21 22 23 24 18.857 17.01115415 14.029 12121 11.784 10.836 10.0179292285487 8.0751756207.10166.6870 6312559731 4.8913 412123963133198 19.660 17.658 15907 14.451 13.16) 12.042 11.061 10.2019.424.77158.17577.64467.1696672963547 601134.504 4.1360 3.9705 3.3230 20456 18.282 16.444 14857 13.469 1230311272 10.371 959121.8432 82864 1.718472297 6.7821 6.39886.042 4.9245 4:1971 3.97643.3254 2120 18.9141633615247 13.799 12.550 11.489 10.5289.70668.99478.34817.784372829680516.43386.0726 2.987141428 3.9611 3.3272 22.023 19.52317.413 15.622 14.08412783 11.654 10.675 982269.07708.4217 7.84317.3300 6.87296.541 6.09714947641474 398493.3286 25 30 35 36 40 50 25.808 22.39619.000 17.292 15.372 1.765 12.40 11.258102749.42698.6908 8.055274957 7.00276.56606.117249789 4.1901394603.3321 29.409 2499921.417 18.668 16.374 14.098129481.665 10.567 9,542 8.8582 2.175875856 7.07006.6166 621594.991541644 3.948433330 30.118 25.489 21.802 18.908 16.547 14.621 13.005 1.717106129.6788 8.8786 8.1924 7.59797.8790662316.2201 4.928416493.9887 3.2001 32.835 27355 22.115 19.793 17.159 15.046 13.30 11.825 10.7579.77918.9611 8.24387.53447,10506641862335 4.996641659 3.94863.3892 39.196 3142425.730 21.412 18.256 15.782 13.80112230 10.962 9.91489.0417 8.30457.6752 7.1327 6.6606 62469 4.999541668 3.98693.3313