A textile company is considering two mutually exclusive investment proposals for its expansion programme. Proposal A requires an initial investment of ₹7,50,000 and yearly operating costs of

₹50,000. Proposal B requires an initial investment of ₹5,00,000 and yearly operating costs of ₹1,00,000.

The life of the equipment used in both the investment proposals will be 12 years with no salvage value;

depreciation is on straight-line basis for tax purposes. The anticipated increase in revenues is ₹1,50,000 per year in both the investment proposals. The tax rate is 35 per cent and cost of capital, 15 per cent.

Which investment proposal should be undertaken by the company?