a)

Stenson, Inc., imposes a payback cutoff of three years for its international investment projects. If the company has the following two projects available, should it accept either of them?

b)

Youre trying to determine whether or not to expand your business by building a new manufacturing plant. The plant has an installation cost of $10.8 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,293,000, $1,725,000, $1,548,000, and $1,310,000 over these four years, what is the projects average accounting return (AAR)?

\begin{tabular}{crr|} \hline Year & Cash Flow (A) & Cash Flow (B) \\ \hline 0 & $75,000 & $125,000 \\ 1 & 33,000 & 29,000 \\ 2 & 36,000 & 32,000 \\ 3 & 19,000 & 35,000 \\ 4 & 9,000 & 240,000 \\ \hline \end{tabular}