Sohar Metal Company is considering three proposals for long term investment. Due to limitation on capital, the company can accept only one out three projects. The following information is available relating to : Initial investment (RO) Steel Plant Aluminium Plant Alloys Plant (100,000) (100,000) (100,000) Operating Profit before depreciation year 1 60,000 54,000 50,000 Operating Profit before depreciation year 2 50,000 46,000 50,000 Operating Profit before depreciation year 3 40,000 40,000 40,000 Operating Profit before depreciation year 4 30,000 36,000 30,000 Operating Profit before depreciation year 5 25,000 25,000 30,000 Scrap value at the end of 5 years 10,000 10,000 5,000 The companys standard payback period is 2 years and standard ARR is 12%. The cost of capital is 10%? You are required to evaluate the above three projects based on following evaluation techniques:

(i) Accounting Rate of Return (ARR)

(ii) Payback Period (PBP)

(iii) Net Present Value (NPV)

(iv) Profitability Index (PI) (v) Internal Rate of Return (IRR)

(vi) Recommend one best project to the Management of Sohar Metal Company for considering for investment. And justify why do you recommend that project for consideration? You are expected to use MS Excel spread sheet for all calculation and to presentation of results of all the three projects under the above-mentioned evaluation techniques.

4. Sohar Metal Company is considering three proposals for long term investment. Due to limitation on capital, the company can accept only one out three projects. The following information is available relating to : Initial investment (RO) Operating Profit before depreciation year 1 Operating Profit before depreciation year 2 Operating Profit before depreciation year 3 Operating Profit before depreciation year 4 Operating Profit before depreciation year 5 Scrap value at the end of 5 years Steel Plant (100,000) 60,000 50,000 40,000 30,000 25,000 10,000 Aluminium Plant (100,000) 54,000 46,000 40,000 36,000 25,000 10.000 Alloys Plant (100,000) 50,000 50.000 40.000 30,000 30,000 5.000 The company's standard payback period is 2 years and standard ARR is 12%. The cost of capital is 10%? You are required to evaluate the above three projects based on following evaluation techniques