Net present value—unequal lives OBJ. 4 Project 1 requires an original investment of $55,000. The project will yield cash flows of $15,000 per year for seven years. Project 2 has a calculated net present value of

$5,000 over a four-year life. Project 1 could be sold at the end of four years for a price of $38,000.

(a) Determine the net present value of Project 1 over a four-year life, with residual value, assuming a minimum rate of return of 20%.

(b) Which project provides the greatest net present value?

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