Review the scenario and complete the activity that follows. This scenario can also be found in the Problems Series A section 10-19A of Ch. 10, Planning for Capital Investments of Fundamental Managerial Accounting Concepts. Dwight Donovan, the president of Donovan Enterprises, is considering 2 investment opportunities. Because of limited resources, he will be able to invest in only 1 of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of 4 years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $400,000 and for Project B are $160,000. The annual expected cash inflows are $126,000 for Project A and $52,800 for Project B. Both investments are expected to provide cash flow benefits for the next 4 years. Donovan Enterprises desired rate of return is 8%. Your task as Senior Accountant is to use your knowledge of net present value and internal rate of return to identify the preferred method and best investment opportunity for the company and present your results to Dwight Donovan. Use Excelshowing all work and formulasto compute the following: The net present value of each project. Round your computations to 2 decimal points. The approximate internal rate of return for each project. Round your rates to 6 decimal points.

LO 10-2, 10-3 CHECK FIGURES a. NPV of A: $17,328.00 b. Rate of return of B: 12% Problem 10-19A Using net present value and internal rate of return to evaluate investment opportunities Dwight Donovan, the president of Donovan Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees Page 472 operating the current equipment. Initial cash expenditures for Project A are $400,000 and for Project B are $160,000. The annual expected cash inflows are $126,000 for Project A and $52,800 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Donovan Enterprises' desired rate of return is 8 percent. Required a. Compute the net present value of each project. Which project should be adopted based on the net present value approach? Round your computations to two decimal points. b. Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? Round your rates to six decimal points. c. Compare the net present value approach with the internal rate of return approach. Which method is better in the given circumstances? Why