Comparing two mutually exclusive projects

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You are comparing two mutually exclusive projects. The first provides after-tax cash flows of $50,000 per year for 5 years and costs $100,000 to pursue. The second provides after-tax cash flows of $25,000 per year for 25 years, but those cash flows do not begin until 4 years from now. This project costs $30,000 to pursue. Both projects have a required return of 12%. Select the option below with the correct NPVs and the correct project choice.

a) NPV1=$80,238.81; NPV2=$94,611.42; choose project 2

b) NPV1=$80,238.81; NPV2=$166,078.48; choose project 2

c) NPV1=$71,641.79; NPV2=$65,724.88; choose project 1

d) None of the above are correct.

Please show all the steps carefully with explanation.

Reference no: EM132036688

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