Problem E Merryll, Inc., is considering three different investments involving depreciable assets with no salvage value. The following data relate to these investments:

InvestmentInitial CostAfter-tax net cash inflowUseful Life (years)

1 $ 140,000$28,000 10

2 240,000 48,000 20

3 360,000 68,000 10

The income tax rate is 40%. Management requires a minimum return on investment of 12%.

Rank these proposals using the following selection techniques:

a. Payback period.

b. Unadjusted rate of return.(remember to calculate and SUBTRACT depreciation from net cash inflow for net income)