Balfe Ltd is a technology company and is considering a number of different capital projects. An initial outlay of $120,000$ is payable immediately, to purchase machines with a life of three years. There are two investment options $$ Project A or Project B $-$ which will yield cash$-$flows over three years as follows:

Project A Project B

Projected Cash inflows Projected Cash inflows

Year $130,00073,000$

Year $250,00055,000$

Year $380,00061,000$

The company has a cost of capital of $11\%.$

Required:

a$)$ For Project A and Project B calculate:

i$.$ Net present Value $($NPV$)$

ii$.$ Discounted Payback

iii. Accounting Rate of Return $($ARR$)$

iv$.$ Estimated Internal Rate of Return $($IRR$)$

b$)$ Critically evaluate which project should be undertaken.