Questions Batelco Inc. is considering two mutually exclusive projects A and 11. Each project requires an initial investment as presented in the below ble 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 Inces 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 (ROI) 18%. A financial analyst, prepared estimates of the annual revenues and costs associated with each project as in the below table Projects A 240,000 Projects B 470,000 Cost of equipment Working Capital needed Overhaul of the equipment in 60,000 80,000 120007 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 year of the project A and project B respectively, for investment elsewhere within the company. The working capital will be released 6th and sth. Required: Depreciation expense 74,000 Fixed out-of-pocket operating 70,000 costs Life of Project 6 year 5 years The working capital will be released 6th and 5th year of the project A and project B respectively, for investmem 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) 2. 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 Present Value of $1 Table Summary Table of present value $1. Periods are listed in first column 1-15 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% Period 1 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0,901 0.893 0.585 0877 0.870 2 0.925 0.907 0.800 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0,593 0,790 0.746 0.705 0.666 0.630 0.500 0.535 0.564 3 4 5 6 60,000 90,000 0.712 0.636 0.567 0.507 0.003 0.613 0.543 0.480 0.709 0.675 0.592 0.519 0456 0.756 0.058 0.572 0.497 0432