• • S7.40 Kurt Hozak, VP of Operations at McClain Manufacturing, has to make a decision between two investment alternatives. Investment A has an initial cost of $61,000, and investment B has an initial cost of $74,000. The useful life of investment A is 6 years; the useful life of investment B is 7 years.

Given a cost of capital of 9% and the following cash flows for each alternative, determine the most desirable investment alternative according to the net present value criterion.

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Investment YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 A's Cash Flow $19,000 $19,000 $19,000 $19,000 $19,000 $19,000 Investment B's Cash Flow 19,000 20,000 21,000 22,000 21,000 20,000 11,000