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Q5. Middle East Corporation currently considering two projects for the investment. Based on ARR both...

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Q5. Middle East Corporation currently considering two projects for the investment. Based on ARR both projects are yielding 15% and 18% respectively, consider this as cost of capital. Finance Manager would like to use NPV and PI to finalize the project section. Cash Inflows at the end of 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year Project A (S) ($150,000) 90,000 60,000 50,000 40,000 30,000 Project B (S) ($300,000) 90,000 50,000 70,000 90,000 100,000 You are required to: 1. Calculate NPV and PI and help the manager for taking right decision. Clearly explain the decision criteria. 17 Marks 2. This company is planning to invest $400,000 on each of these projects. Will there be any change in NPV & PI? Explain your answer with relevant calculations and examples. 17 Marks *****

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