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Given the following projects A and B which are mutually exclusive and their respective cash flows, which project

would you choose if

 i) The rate of return is 8 percent            [3 marks]

 ii) The rate of return is 11 percent                      [3 marks]

iii) How is the decision affected by the rate of return? What should the project manager do               [2 marks]  

     Year       Project A                 Project B

  0                -$240,000                 -$198,000

  1                $ 0                             $110,800 

  2                 $ 0                              $ 82,500  

  3                  $325,000                     $ 45,000