Net Present Value and Expected Values. Two competing investment alternatives are being considered by the Mills Company. One alternative costs \(\$ 130,000\). The other alternative costs \(\$ 160,000\). An investment of this type is expected to earn a discounted ROR of at least 14 percent. The two projects are each expected to last five years. Ignore taxes. Probabilities of annual revenues from each project differ as follows:

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Determine the more desirable alternative by the NPV method.

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Annual Revenue Probabilities $130,000 Investment $160,000 Investment 10% $ 10,000 10% $ 20,000 10% 20,000 20% 40,000 15% 30,000 40% 60,000 20% 40,000 20% 80,000 25% 50,000 10% 100,000 10% 60,000 10% 90,000