Q1: ABC company is evaluating a project proposal which is expected to have a life of 10 years. The project proposal under consideration requires an initial investment of OMR 180000, and generates a revenue of OMR 75000 annually in the starting two years, and then the revenue is expected to decrease gradually at the rate of 12% every year for the remaining life of the project. Compute the value of the project at the end of its life considering the rate of interest 8% and expected salvage value of OMR 10000. Also draw its cash flow diagram.

Q2: A company is planning to replace an existing machine with a new machine at a cost of OMR 125000, which is expected to generate a revenue of OMR 65000 in the first year, and then gradually increase yearly by 3.5 % up to the end of life. The companys CEO has decided that for any investment undertaken should have a profitability index more than 2.5. What is the profitability index of the proposed investment if the life of the proposed machine is 8 years? Does the investment meet the criteria set by the CEO? Assume discount rate 12%. Comment on the effect of reducing discount rate by 10% on the profitability index.

Q3: The information collected from a company manufacturing three different products such as Product-A, Product-B & Product-C is given in the table below. Complete the table by filling the dash fills for each product and evaluate up to what level the company can offer discount on each product without incurring

any loss.

3. The information collected from a company manufacturing three different products such as Product-A, Product-B & Product-C is given in the table below. Complete the table by filling the dash fills for each product and evaluate up to what level the company can offer discount on each product without incurring any loss. (10 Marks) Total Selling Variable Total contribution Total Product Price per cost per units (or) Total Fixed Net Break Even unit unit sold contribution cost Income Point in (OMR) (OMR) margin (OMR) (OMR) units 50 240000 1500000 1300000 B 12 200000 700000 30 200000 35000 20 40 6. A financial institution is paying interest for the deposited amount at the rate of 9.5% per annum, compounded quarterly. If a person invests an amount today, then how long must he wait to grow his investment by 75%. Also comment on the period of desired return if the offered rate of interest per annum is reduced by 8%, compounded monthly. (6 Marks) End of Questions