Financial and Managerial Accounting: P26-38 Daniels Consulting is considering purchasing two

Financial and Managerial Accounting 
P26-38 Using payback, ARR, NPV and Irr to make capital investment decisions 
This problem continues the Daniels Consulting situation from Problem 25-34 of Chapter 25. 
Daniels Consulting is considering purchasiing two different types of servers. 
Server A will generate net cash inflows of $26,000 per year and have a zero residual value. Server A's estimated useful life is three years, and it costs $44,000. 
Server B will generate net cash inflows of $28,000 in year 1, $11,000 in year 2, and $5,000 in year 3. Server B has a $5,000 residual value and an estimated life of three years. Server B also costs $44,000. Daniels's required rate of return is 14%. 

Requirements: 
1 Calculate payback, accounting rate of return, net present value, and internal rate of return for both server investments. Use Microsoft Excel to calculate NPV and IRR. 
2. Assuming capital rationing applies, which server should Daniels invest in?
Powered by