6. Investment A has an initial cost of $200 and investment B has an initial cost of $300. The investments are independent. Net benefits in dollars for both invest- ments over nine years are: Year Year 1 2 3 4 5 6 1 8 2 AB A 100 110 120 130 130 130 125 120 115 225 230 235 240 230 220 210 200 190 Determine the net present value of each investment when the discount rate is 8 per- cent. Which investment would you select when there is no capital rationing? Why? 7. Consider three mutually exclusive investments: Investment Cost ($) 1,000 Annual Net Return ($) 300 450 600 ABC 700 1,300

a. Use the incremental IRR criterion to select the most efficient investment when the discount rate is 15 percent.

b. Would you select the same investment with the incremental BCR and the NPV criteria? Explain.