QUESTION 7 You have been asked to evaluate 2 projects using only profitability models. a)Show the formula and calculate Average Rate of Return (ARR) and Payback Period (PP) for the following projects. (4 marks). b) If you were making a decision based purely on Average Rate of Return, which project would you select? (1 mark) c) If you were making a decision based purely on Payback Period, which project would you select? (1 mark) PROJECT BANANA PROJECT APPLE Interest Rate = 3% Inflation = 296 Fixed Investment = $200,000 Annual Cash Inflow $15,000 Avg Annual Profit = $12,000 Interest Rate 4% Inflation = 9% Fixed Investment = $50.000 Annual Cash Intlow = $10,000 Avg Annual Profit $6,000