A company is considering two alternative methods of producing a new product. The relevant data concerning the alternative are presented below.

	Alternative 1	Alternative 2
Initial investment	$64,000	$120,000
Annual Receipts	$50,000	$60,000
Annual Disbursements	$20,000	$12,000
Annual Depreciation	$16,000	$20,000
Expected Life	4 years	6 years
Salvage Value	0	0

At the end of the useful life of whatever equipment is chosen the product will discontinue. The company's tax rate is 50% and its cost of capital is 10%.

A. Calculate the Cash flow paying particular attention to the cash flow impact of taxes and depreciation.

B. Calculate the net present value of each alternative.

C. Calculate the internal rate of return for each alternative.

D. If the company can implement only one of the two alternatives, and there is no restriction on investment amount, which alternative should be chosen? Why?