Question: The following statements give quantitative considerations relevant for the ranking of projects A & B.

CRITERIA                                                    PROJECT A         PROJECT B

Investment                                           400.00              300.00

Internal rate of return                               18%               20%

Present value at 5% discount factor         542.70            421.20

NPV at 6% dicount factor                       142.70            121.20

NPV at 12% discount factor                      60.50             60.50

Project A required an investment of $ 400.00 and was expected to have cash inflow of $ 110.00 , $ 120.00 , $ 130.00 , $ 140.00 & $ 150.00 over its 5 year economic life. Project B involved an investment of $ 300.00 and was expected to have cash inflows of $ 100.00 each over its 5 year economic life.

Which of the two projects will you select if cost of capital is

(i) 10%

(ii) 20% and

(iii) 15% ?

Give reasons in support of your decision.