Qulck Freeze Foods Co produces a range of convenience processed foods for a number of supermarket chain

stores. Its success has been based on the expertise and customer$-$driven emphasis of its research and development

toam.

The R&D team has identifled three mutually exclusive projects which could be undertaken. The finance director has

recruited you as assistant accountant to carry out a financial evaluation of each project.

Details of the three projects' cash flows are shown below.

Cash flow timing

Assume that cash flows occur at the ends of each of the years shown.

Note. The present value of $$1$ in $n$ years is as follows.

Required

$($a$)$ Using each of the following appraisal methods rank the projects in order of their investment potential.

$($i$)$ Net present value $($NPV$)$ at $10\%$

$($ii$)$ Approximate internal rate of return $($IRR$)$

$($b$)($i$)$ Critically compare each of the above investment appralsal methods.

$($ii$)$ Explain which method you regard as the most useful for project appraisal and which project you

would recommend.