In evaluating these projects, please respond to the following questions:

a) Why is the capital-budgeting process so important?

b) Why is it difficult to find exceptionally profitable projects?

2) You are tasked to evaluate two capital-budgeting proposals. You have been asked not only to provide a recommendation but also to respond to a number of questions aimed at assessing your understanding of the capital-budgeting process. This is a standard procedure for all new financial analysts at Axelon, and it will serve to determine whether you are moved directly into the capital-budgeting analysis department or are provided with remedial training. Provide an evaluation of two proposed projects, both with 5-year expected lives and identical initial outlays of $110,000. Both of these projects involve additions to Axelon's highly successful product line, and as a result, the required rate of return on both projects has been established at 12 percent. The expected free cash flows from each project are as follows: 40000 40000 2000 30000 40000 40000 50000 40000 70000 40000 - 110000 -110000