The directors of Mylo Ltd are currently considering two mutually exclusive investment projects. Both projects are concerned with the purchase of new plant. The following data are available for each project:

	Project 1	Project 2
Cost (immediate outlay)	100,000	60000
Expected annual net profit (loss)
Year 1	29,000	18000
Year 2	(1000)	(2000)
Year 3	2,000	4,000
Estimated residual value of the plant	7,000	6,000

The business has an estimated cost of capital of 10%, and uses the straight- line method of depreciation for all non-current (fixed) assets when calculating net profit. Neither project would increase the working capital of the business. The business has sufficient funds to meet all capital expenditure requirements.

Calculate for each project

Accounting rate of return

The net present value

The approximate internal rate of return

The payback period

State which, if any, of the two investment projects the directors of Mylo Ltd should accept, and why.

State, in general terms, which method of investment appraisal you consider to be most appropriate for evaluating investment projects, and why.