Carr Company has to choose between two capital investment proposals (Important: It can only fund one of them). Estimates regarding each project are provided below:

Project Soup Project Nuts

Initial investment $400,000 $600,000

Annual net income 30,000 46,000

Net annual cash inflow 110,000 146,000

Estimated useful life 5 years 6 years

Salvage value -0- -0-

The company requires a 10% rate of return on all new investments.

Present Value of an Annuity of 1

Periods 9% 10% 11% 12%

5 3.890 3.791 3.696 3.605

6 4.486 4.355 4.231 4.111

The internal rate of return for Project Soup is

a.

greater than the discount rate of 10%

b.

less than the discount rate of 10%

c.

equal to the discount rate of 10%

d.

none of the above.

__________________________________________

Which project should be funded?

	a.	Project Soup.
	b.	Neither Project.
	c.	Project Nuts.
	d.	Insufficient information to make a determination.