Ebernzer & Rosina Consult the Accountant of your company has recently been taken ill through work stress. In their absence$,$ his assistant has prepared some calculations of mutually exclusive investment projects. Both projects are concerned with the purchase of new plants.

The following data is available for each project. Plant $1$ Plant $2$

Cost of Plants GH $100,00060,000$

Expected Annual Profits

$129,00018,000$

$2(1,000)(2,000)$

$32,0004,000$

Estimated Residual Value $7,0006,000$

The company has an estimated cost of capital of $10\%$ and employs the straight$-$line method of depreciation for all fixed assets. Neither project would increase the working capital of the company. The company has sufficient funds to meet all capital expenditure requirements. Required:

a$.)$ For each of the plants, calculate and comment on your findings about the proposed investments:

i$)$ the Payback Period

ii$)$ the Net Present Value $($NPV$)$

iii$)$ the Internal Rate of Return $($IRR$)$

b$.)$ State which, if any, of the two investment projects your company directors should accept and why? From your answer b above, discuss the reasons why the IRR method of investment appraisal should be preferred to other NPV$.$