The Tearess Company Can Accept Either Proposal a or Proposal

Essay

The Tearess Company can accept either Proposal A or Proposal B (but not both), or it can reject both investment proposals. Proposal A requires an investment of $7000 and promises increased net cash inflows of $2600 for 5 years. Proposal B requires an investment of $7000 and promises increased net cash inflows of $3000 in each of the first 3 years, $2000 in the fourth year and $2200 in the fifth year. The business' minimum acceptable rate of return is 20%.
Required:
Prepare an analysis to determine which (if either) of the proposals should be selected for investment.