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Problem 5 (12 marks) Assume that you are an investor, and the management of Bitter...

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Problem 5 (12 marks) Assume that you are an investor, and the management of Bitter Inc. and Sour Inc. has approached you asking for an investment of $480,000 and $530,000 respectively. The management has offered the following expected cashflows in the future: Sour Inc. Year Bitter Inc. 17.400 2 24.800 51.300 73.600 82.000 99.000 112.000 S 119.000 9 126.900 10 101.000 11 99.500 76.900 600 19,000 61,000 78.000 108.000 141.000 172.000 185.000 199.000 103.000 45.000 33.0 1 Year Bitter Inc. Sour Inc. 17,400 2 24,800 3 51,300 19,000 4 73,600 61,000 5 82,000 78,000 99,000 108,000 7 112,000 141,000 8 119,000 172,000 9 126,900 185,000 10 101,000 199,000 11 99,500 103,000 12 76,900 45,000 13 62,700 33,000 14 44.000 22,000 15 35,000 11,000 The management of Bitter Inc. has contemplated that it would need an additional support of $45,000 at the end of 8th year, and Sour Inc. would ask for an additional investment of $38.000 at the end of 10th year. Assume your expected return on investment to be 6%. Analyse both the investment proposals using the following criteria: 1. Net present value 2. Payback period 3. Discounted payback period o

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