You are considering the following mutually exclusive projects. Both projects will be depreciated using straight line...

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Accounting

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.

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Answer 1 Calculation of net present value of both project using required rate of return as discount rate Project A Project B Year Discount factor 10 Cash flow Present value Year See Answer

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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%