A company has to choose between two different investments.

Investment A: This investment requires an immediate outlay of $60,000 and another investment of $50,000 in year 3. The investment will return annual profits of $45,000 from year 2 to year 8. At the end of year 8, the investment has a residual value of $20,000.

Investment B: This investment requires an immediate outlay of $25,000 and additional investments of $10,000 per year from year 1 to year 3. The investment will return annual profits of $28,000 from year 4 to year 8. At the end of year 8, the investment has a residual value of $20,000.

The cost of capital is 7.5%.

a. Calculate the NPV for investment A.

Round to the nearest cent

b. Calculate the NPV for investment B.

Round to the nearest cent

c. Which investment should the company choose?

Investment A

Investment B

Niether