Dwight Donovan, the president of Benson Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for project A are $103,000 and for project B are $49,000. The annual expected cash inflows are $31,793 for project A and $15,458 for project B. Both investments are expected to provide cash flow benefits for the next four years. Donovan Enterprises cost of capital is 8 percent

a. Compute the net present value of each project A and B. Which project should be adopted based on net value approach?

b. Compute the approximate internal rate of return of each project A and B. Which one should be adopted based on the internal rate of return approach?

PV of $1

yrs1- 0.925926 , yr2- 0.857339 yr3 - 0.793832 yr 4 - 0.735.30

PVA of $1

yr1- 0.925926 yr 2-1.783265 yr.3- 2.577097 yr4- 3.312127