Monitor Consulting Inc. is in need of a Date Analytic Terminal for its financial analysts. The company has received three proposals, with related facts as follows:

Proposal AProposal BProposal C

Initial investment in equipment$90,000$90,000$90,000

Annual cash inflow increases in operations:

Year 180,00045,00090,000

Year 210,00045,0000

Year 345,00045,0000

Salvage value000

Estimated life3 yrs.3 yrs.1 yr.

The company uses straight-line depreciation for all capital assets. Ignore income taxes.

Required:

a.Compute the payback period, net present value, and accrual accounting rate of return using average annual income, for each proposal. Use a discount rate of 14 percent.

b.Rank each proposal 1, 2, and 3 using each method separately. Which proposal is best? Why?