## The fun Foods corporation must decide on what new product lines to introduce n

The fun Foods corporation must decide on what new product lines to introduce next year .After tax cash flows are listed below along with initial investments
.The firms cost of capital is 12% and its target accounting rate of return is 20%.Assume straight line depreciations and an asset life of five years .The
corporate tax rate is 35%.All projects are independent.

Projects

Investment

Year1

Year2

Year 3

Year 4

Year 5

A

\$5000

\$800

\$1000

\$350

\$1250

\$3000

B

\$7500

\$1250

\$3000

\$2500

\$5000

\$5000

C

\$4000

\$600

\$1200

\$1200

\$2400

\$3000

a) Calculate the accounting rate of return on the project. Which projects are acceptable according to this
criterion?(Note Assume net income is equal to aftertax cash flow less depreciation)Please show complete work.I need to
understand how you get the solution

b) Calculate the payback period. All projects with a payback of fewer than four years are acceptable. Which
are acceptable according to this criterion?

c) Calculate the projects NPV s .Which are acceptable according to this criterion

d) Calculate the Projects IRRs .Which are acceptable according to this criterion

e) Which projects should be chosen

Please show the work especially for A im trying to understand how the solution is derived .I have seen the