One of three projects of a company is doing poorly and is being considered for replacement. The projects are expected to require `2,00,000 each, have an estimated life of 5 years, 4 years, and 3 years...

One of three projects of a company is doing poorly and is being considered for replacement. The projects are expected to require `2,00,000 each, have an estimated life of 5 years, 4 years, and 3 years respectively, and have no salvage value. The required rate of return is 10 per cent. The anticipated cash flows after taxes (CFAT) for the three projects are as follows:

(i) Rank each project applying the methods of payback, average rate of return, net present value, and internal rate of return.

(ii) Recommend the project to be adopted and give reasons.