5 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 Awill be 5-Year's and Project B will be 6 years, and both projects carry same risk. Batelco Inc uses a discount rate of 12%. After considering the current economic situation BatelcoInc. 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 associatedwith each project as in the below table:Projects A240,000Projects B470,000Cost of equipmentWorking Capital neededOverhaul of the equipment in60,00080,0001200014000two yearsAnnual revenues and costs:Sales revenues375,000300,000Variable expenses180,00090,000Depreciation expense48,00078,333Fixed out-of-pocket operating90,00070,000costsLife of Project5 year6 yearsThe working capital will be released 5th and 6th 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. (2. Calculate the simple rate of return for each product. (3. Which of the two projects (if either) would you recommend that Batelco Inc. accept? Why?Present value tables are given below to determine the appropriate discount factor(s) using the tables provided.

Answered: Image /qna-images/answer/a0743bab-d556-4e64-9ae7-cfed49beb498.jpg

capital will be released 5 and 6 year of the project A and project B respectively, for investment elsewhere within the compa late the net present value for each project. (- ulate the simple rate of return for each product. ( th of the two projects (if either) would you recommend that Batelco Inc. accept? Why?

capital will be released 5 and 6 year of the project A and project B respectively, for investment elsewhere within the compa late the net present value for each project. (- ulate the simple rate of return for each product. ( th of the two projects (if either) would you recommend that Batelco Inc. accept? Why?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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