Mary is considering investing in three projects: Omega, Alpha and Sigma with initial investments of $300,000, $250,000 an $320,000 respectively. Each project is expected to have a life of five (5) years and an ending book value of $200,000. The expected profits generated by the projects are as follows:

Profits after tax and depreciation

Project Omega	Project Alpha	Project Sigma
$	$	$
90,000	30,000	40,000
90,000	60,000	80,000
65,000	120,000	160,000
55,000	33,000	44,000
90,000	57,000	76,000
390,000	300,000	400,000

1. Please assist Mary in deciding which project to invest in by calculating:
   1. the average profits for each project. (6 marks)
   2. the average capital for each project. (6 marks)
   3. the accounting rate of return (ARR) on initial capital for each project.

(6 marks)

4. the accounting rate of return (ARR) on average capital for each project.

(6 marks)

2. Based on your calculations, which Project would you recommend Mary to invest in? (1 mark)