The Northport Hotel is trying to estimate the ROA on a proposed dining room expansion. The expansion project is expected to generate the following annual net cash inflows:

+$50,000 +$50,000

+$50,000 +$50,000 +$50,000 The expansion is expected to require an investment cash outflow of $100,000 at year 0.

Required:

1. Calculate the ROA on the project as an accounting rate of return. (Use average annual net cash inflow instead of after-tax income in the numerator of the ROA.)

2. Calculate the ROA on the project as an internal rate of return.

3. Your answers to 1 and 2 above should differ. Explain why.