a) $130,000
b) Project Atlanta has the shorter payback period
|
Atlanta
|
Boston
|
|
Payback
|
1 year and 10 months
|
2 years and 2 months
|
|
ARR
|
7.7%
|
12.8%
|
c) Both projects do better than the interest rate so are worth pursuing, but Project Boston has a much better ARR ,however the projects cost the same.
d) This depends on whether the firm's priority was a quick return on the investment (in which case Atlanta would be picked) or if profit were additional of a priority. Although there is a enhanced average rate of return for Boston, much of the money is inward at a later stage in the project's timeline, i.e. it would be worth less in today's value