1.You are the manager of a medical testing lab and studying the cash flows of two projects: project A involves buying new testing equipment today and project B involves hiring more technicians in the lab. The following table includes the cash flows of the 2 projects:

Cash Flow stream

End of year

Project A

Project B

1

$50,000

$10,000

2

$40,000

$20,000

3

$30,000

$30,000

4

$40,000

$40,000

5

$50,000

$50,000

Undiscounted Cash Flows

$150,000

$150,000

a.Find the present value of each project using a 15% discount rate.

Compare the calculated present values and discuss the difference between them because the undiscounted total is $150,000 for each.