X company is exmanining two mutually exclusive proposals

Question

Question: CAPITAL BUDGETING

X Company is exmanining two mutually exclusive proposals for new capital investment.The data on the proposals are as follows

                                           A                 B
                                          ($)              ($)

Net cash outlay                   40000          50000
Salvage value                         Nil              Nil
Estimated life                      4 years        4 years
Depricistion SLM SLM
Income Tax rate                     50%           50%
Cut off rate for appraisal          10%           10%
EBIT
Ist Year                             12000          14000
2nd Year                            14000          16000
3rd Year                             16000          18000
4th Year                             22000          22000
5th Year                                 -             20000

You are asked to advise which proposal would be financially preferable.