QUESTION $1$

A company is considering two alternative investment projects, both of which require the purchase of

new equipment. The following information relates to the two projects:

Assume that net cash inflows occur at the end of the years to which they relate.

The company's depreciation policy is to write off the cost of equipment using the straight$-$line method.

Cost of capital is $10\%$ per annum.

REQUIRED

$($a$)$ Calculate for each of Project A and Project B$,$ the

$($i$)$ net present value.

$($ii$)$ internal rate of return $($use $5\%$ and $25\%$ as discount rate$).$

$($b$)$ Recommend which project should be undertaken giving

reasons for your decision.

solve it properly and explain each and every step