**Answer:**

**Neither any of the projects should be accepted**

**Explanation:**

In this question, we have to use the net present value formula which is shown below:

**Net present value = Present value of all years cash flows - Initial investment**

where,

The Present value of cash inflows is calculated by applying the discount rate which is presented below:

For this, we have to first compute the present value factor which is computed by a formula

**= 1 ÷ (1 +rate) ∧ number of year**

number of year = 0

number of year = 1

Number of year = 2

So,

Rate = 25%

For year 1 = 0.800 (1 ÷ 1.25) ∧ 1

For year 2 = 0.640 (1 ÷ 1.25) ∧ 2

Now, multiply this present value factor with yearly cash inflows

So

**For Project A, **

The present value of year 1 = $400 × 0.800 = $320

The present value of year 2 = $400 × 0.640 = $256

and the sum of all year cash inflow is $576

So, the Net present value would be equal to

= $576 - $600 = -24

And,

**For Project B,**

The present value of year 1 = $500 × 0.800 = $400

The present value of year 2 = $275 × 0.640 = $176

and the sum of all year cash inflow is $576

So, the Net present value would be equal to

= $576 - $600 = -24

Since in both the projects, the NPV is negative.

**Hence, neither any of the projects should be accepted**