Better plc is comparing two mutually exclusive projects, whose details are given below.

The company's cost of capital is 12 per cent.

(a) Using the net present value method, which project should be accepted?
(b) Using the internal rate of return method, which project should be accepted?
(c) If the cost of capital increases to 20 per cent in year 5, would your advice change?

Project A Project B Year 0 Year Year 2 Year 3 Year 4 Year 5 (1 40