uestion 5 10 points Batelco Inc. is considering two mutually exclusive projects A and B. Each project requires an initial investment as presented in the below table. The economic life of the project A will be 6-Year's and Project B will be 5 years, and both projects carry same risk. Bateico 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 (ROI) 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 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 Fixed out-of-pocket operating 90,000 70,000 costs 6 year 5 years Life of Project Q 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 (table 14B-1) is given below to determine the appropriate discount factor(s) using the tables provided. Period 1 2 3 4% 5% 0.962 0.952 0.925 0.907 0.889 0.864 0.855 0.823 0.822 0.784 0.790 0.746 0 760 0.711 0.731 0.677 9 0.703 0.645 10 0.676 0.614 or the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac 4 5 6 7 8 Table 1411 1 Present Value of $1 Table Summary Table of prosent value $1. Periods are listed in first column 1-15 6% 7% 8% 9% 10% 11% 0943 0.935 0.926 0917 0,909 0.901 0890 0.873 0.057 0.842 0.826 0812 0840 0.816 0.794 0772 0751 0.731 0.792 0.763 0.735 0.708 0.683 0.659 0.747 0.713 0.681 650 0.621 0.593 0.705 0.666 0.630 0.596 0.564 0.535 0.665 0583 0623 0.547 0.482 0513 0.434 0627 0.582 0540 0.502 0.467 0.592 0.544 0.600 0.460 0424 0.391 0,508 0.558 0.463 0 422 0.386 0.352 12% 0.893 0.797 0712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 13% 0505 0783 0,693 0613 0.543 6480 0.425 0.376 0.333 0.295 14% 0877 0.769 0.675 0.592 0.519 0.456 0.400 0:351 0,306 0276 15% 0870 0.756 0.658 0572 0491 0432 0.376 0327 0284 9247