Detailed Answer
Answer (C) is correct. The desired rate of return at which the two projects will produce the same NPV can be found by calculating the IRR of the difference in cash flows between the two projects. Proposal A requires an additional investment of $53,000 and generates extra cash flows of $15,000 for 6 years. Dividing the incremental investment by the annual cash flows yields a result of 3.533 ($53,000 ÷ $15,000). In other words, this
is the present value factor necessary to make the cash flows equal the incremental investment. Consulting the present value table for an ordinary annuity for 6 years reveals that 3.533 is somewhere between 16% and 18%.