Hibbing Technology is considering two alternative proposals for modernizing its production facilities. To provide a basis for selection, the cost accounting department has developed the following data regarding the expected annual operating results for the two proposals. Proposal A Proposal B Required investment in equipment $ 560,000 $ 490,000 Estimated service life of equipment 8 years 7 years Estimated salvage value $ 0 $ 70,000 Estimated annual cost savings (net cash flow) 112,000 122,500 Depreciation on equipment (straight-line basis) 70,000 60,000 Estimated increase in annual net income 56,000 40,000 Required: a. For each proposal, compute the following. Assume discounted at an annual rate of 12 percent. Use Exhibits 26-3 and 26-4 where necessary. (1) Payback period (2) Return on average investment (3) Net present value b. On the basis of your analysis in part a, state which proposal you would recommend.