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Transcription of this question: 2.Bangkok Shrimp (BS)In 2011 , an environmental catastrophe contaminated the waters off thecoast Of South America, one Of the main fishing areas Of the world.As a result Of the catastrophe (and the resulting lower supply Ofshrimp),the price Of shrimp worldwide increased by 300/0. Aroon Bhuvanadh,owner Of Bangkok Shrimp (BS) located in Thailand, saw this as anexcellent opportunity to expand his business. He decided to increasethe number Of his shrimp boats from two to three in order to benefitfrom the higher prices and profits.[image:Pearson ScottFore sman]The price Of the new shrimp boat is S 175000. If the selling price of shrimp remains at the currenthigh levels, anticipated profits per boat after all expenses would be $35 000 per year. If prices fall topre-2011 levels, the profit would decrease to S 10000. Aroon’s bank will provide finance for the newboat. If the new boat is properly maintained, it will last longer than the proposed seven-year term Ofthe bank loan.Aroon captains one Ofthe existing boats. He currently employs an experienced captain for the secondboat, and he will have to recruit an additional experienced captain for the third boat.Aroon’s wife Kanya is worried that the price Of shrimp may return to pre-2011 levels before thebank loan is repaid. For this reason, she wants to change the legal structure Of the business from asole trader to a private limited company.Aroon has a vision: by taking advantage Of the opportunity Of the current high shrimp prices, he willown three shrimp boats and, later, can leave one boat to each Of his three sons when he and Kanyaretire in 2017.(This question continues on the following page)(Question 2 continued)(a)(b)(c)(d)(e)Identify two advantages and two disadvantages Of changing the legal structureOf BS to a private limited company.Assuming shrimp prices remain at current high levels, calculate for the newshrimp boat (show all your working):(i) the payback period (without depreciation).(ii) the average rate of return (ARR) over a seven-year period.Assuming shrimp prices return to their pre-2011 levels two years after BSacquires the new shrimp boat, calculate (show all your working):(i) the payback period (without depreciation).(ii) the average rate Of return (ARR) over a seven-year period.Comment on the results Of your investment appraisal calculations in parts(b) andUsing Maslow ‘s hierarchy ofneeds theory, analyse Aroon ‘s motivation to acquirethe additional shrimp boat.[4 marks][2 marks/[2 marks/[2 marks/[2 marks/[3 marks/[5 marks/

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