Hawk Airlines is planning a project that is expected to last for six years and generate annual net cash inflows of $75,000. The project will require the purchase of a $280,000 machine, which is expected to have a salvage value of $10,000 at the end of the six-year period. The machine will require a $50,000 overhaul at the end of the fourth year. The company presently has a 12% minimum desired rate of return.

Based on this information, an accountant prepared the following analysis:

Annual net cash flow		$75,000
Annual depreciation	$45,000
Annual average cost of overhaul	8,333	(53,333)
Average annual income		$21,667

Return on Investment = $21,667 $280,000 = 7.74%

The accountant recommends that the project be rejected because it does not meet the company's minimum desired rate of return. Ignore income taxes. Required: A. What criticism(s) would you make of the accountant's evaluation? B. Use the net-present-value method and determine whether the project should be accepted. C. Based on your answer in requirement "B," is the internal rate of return greater or less than 12%? Please explain your rationale.