The following data are applied relating to two investment projects, only one of which may be selected Initial capital expenditure Profit (loss) year 1 2 3 Estimated resale value at end of year 4 Note 23 Project A project B 50,000 50,000 25,000 10,000 20,000 10,000 15,000 14,000 Page 3 of 5 10,000 26,000 10,000 10,000 1. Profit is calculated after deducting straight-line depreciation. 2. The cost of capital is 10 per cent Required: a. Calculate for each project: i. ii. Net present value Average annual rate of return on average capital invested; Payback period (2 marks) (2 marks) (8 marks) b. Briefly discuss the relative merits of the three methods of evaluation in (a) above. (4 marks) c. Explain which project you would recommend for acceptance. (1.5 marks)