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TOMs Tomatoes and Herbs, LLC is considering investing in two alternative projects to improve the processing and packaging of TOMs Old World Spaghetti Sauce. Investment

TOMs Tomatoes and Herbs, LLC is considering investing in two alternative projects to improve the processing and packaging of TOMs Old World Spaghetti Sauce. Investment A has a lifespan of 8 years and initial costs of $20,000. Investment B has a lifespan of 5 years and initial costs of $10,000. TOMs Tomatoes and Herbs, LLC assumes a 10% discount rate on potential investments.

The yearly after-tax benefits for investment A are as follows:

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

$2,000

$3,000

$4,000

$5,000

$6,000

$5,000

$4,500

$3,500

The yearly after-tax benefits for investment B are as follows:

Year 1

Year 2

Year 3

Year 4

Year 5

$3,000

$3,000

$3,000

$3,000

$3,000

Assuming straight line depreciation of the two investments and a salvage value of $1,000 for Investment A and $500 for Investment B, what are the Average Annual Rates of Return of each investment? Round to the nearest dollar or tenth for the percentage.

Year
Investment A 1 2 3 4 5 6 7 8 Average

After-tax Benefits

$2000 $3000 $4000 $5000 $6000 $5000 $4500 $3500 $4125

Value of Investment A

1-Jan
31-Dec
Average

Average Annual Rate of Return for Investment A: %

Year
Investment B 1 2 3 4 5 Average

After-tax Benefits

$3000 $3000 $3000 $3000 $3000 $3000

Value of Investment B

1-Jan
31-Dec
Average

Average Annual Rate of Return for Investment B: %

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