1.What are the principal objections to the use of the average rate of return in evaluating capital investment proposals? 2. Discuss the principal limitations of the cash payback method for evaluating capital investment proposals. 3. The following data are accumulated by ChemLabs, Inc. in evaluating two competing capital investment proposals:

Testing Equipment Vehicle Amount of investment $90,000 $25,000

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Useful life 6 years 8 years

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Estimated residual value 0 0

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Estimated total income over the useful life $24,300 $15,000

Determine the expected average rate of return for each proposal.