Remaining Time: 1 hour, 56 minutes, 27 seconds. Question Completion Status Question 5 10 points 123 Batelco Inc. is considering two mutually exclusive projects A and B. Each project requires an initial investment as presented in the below table. The econo life of the project A will be 6-Year's and Project B will be 5 years, and both projects carry same risk. Batelco Inc uses a discount rate of 12%. After consider the current economic situation Batelco Inc. has set a maximum payback period of 4 years and minimum return on investment (ROI) 18%. A financial anal prepared estimates of the annual revenues and costs associated with each project as in the below table: Projects A Projects B 470,000 240,000 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 90,000 70,000 Fixed out-of-pocket operating costs Life of Project 6 year 3 years The working capital will be released 6th, and sth. year of the project A and project B respectively, for investment elsewhere within the company. Required: DELL Depreciation expense 60,000 74,000 Fixed out-of-pocket operating 90,000 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 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 tables are given below to determine the appropriate discount factor(s) using the tables provided Table of present value $1 9% 10% 12% 11% 14% 13% 8% 15% 6% 4% 3% Period 1 0870 0805 0901 Garz 0.017 0909 0926 0.952 0.943 0.962 0.76 Gre 0042 0763 0.707 0820 0812 0.857 0800 0.907 0.925 2 0883 DAYS 1000 0712 0,772 0.761 0.704 0731 0889 0.840 0.864 11572 0.382 0850 0.700 0830 0.083 0735 0792 0.823 GATE 0.855 8412 0.583 0400 0.681 0747 0621 0822 0784 DELL 3 4 5 7% 0.005 0873 0816 0.763 0713 0413 0543
