You are considering the following mutually exclusive projects.Both projects will be depreciated using straight line depreciationto a zero book value over the life of the project. Neither projecthas any salvage value.
| Year | Project A | Year | Project B |
| 0 | $ - 75,000 | 0 | $-70,000 |
| 1 | 19,000 | 1 | 10,000 |
| 2 | 48,000 | 2 | 16,000 |
| 3 | 12,000 | 3 | 72,000 |
| Required Rate of Return | 10% | | 13% |
| Required Payback Period | 2 years | | 2 years |
| Required Accounting Return | 8% | | 11% |
| | | |
1. Based on the net present value method of analysis, whichproject should you accept? Provide Proof.
2. Based on the on the internal rate of return analysis, whichproject should you accept? Provide Proof.
