You are considering the following two mutually exclusive projects. Both projects will be

depreciated using straight$-$line depreciation to a zero book value over the life of the project.

Neither project has any salvage value. Based upon the average accounting return $($AAR$)$

and the information provided in the problem, you:

Project A Project B

Year Cash flow Cash flow

$0-75,000-70,000$

$119,00010,000$

$248,00016,000$

$312,00072,000$

Required rate of return $10\%13\%$

Required payback period $2\mathrm{.}0$ years $2\mathrm{.}0$ years

Required AAR $8\%11\%$

A$.$ should accept both project A and project B$.$

$6$

B$.$ should accept project A because the AAR exceeds the required rate.

C$.$ cannot compute the AAR of either project.