Your client is considering 2 projects. Each project will cost $275,000 to introduce and will last for 5 years. The annual after-tax cash flows from Project A will be $88,000/year while Project B will provide the following:
Year Annual Cash Flow
1 $ 60,000
2 $ 80,000
3 $100,000
4 $100,000
5 $100,000
The firm has a cost of capital of 10% and only one project can be chosen. Use the net present value method to determine which project should be selected.