A company is considering two capital expenditure proposals. Both proposals are for similar products and both are expected to operate for four years. Only one proposal can be accepted.

The following information is available.

Profit/(loss)
	Proposal A	Proposal B
	$	$
Initial investment	46,000	46,000
Year 1	6,500	4,500
Year 2	3,500	2,500
Year 3	13,500	4,500
Year 4	(1,500)	14,500
Estimated scrap value at the end of year 4	4,000	4,000

Depreciation is charged on the straight-line basis.

REQUIRED:

1. Calculate the following for both proposals.
   1. The payback period to one decimal place (4 marks)
   2. The return on capital employed on average investment (4 marks)

2. Give two advantages for each of the methods of appraisal used in (a) above.

(8 marks)