A company is considering manufacturing 2 mutually exclusive

products A and B. Product A is a watch band specifically designed to fit on watches

manufactured by the firm only. Product B is a watch band that is designed to be

adapted to a variety of watches including those produced by competitors. Expected

investment is $100,000 for each of the products. Expected cash flows are $20,000

per year for product A. The expected value for B is $23,000 for 8 years also. The

coefficient of variation (CV) for A is 1.0 and for B is 1.5. Because of high risk

attached to B the risk adjustment to B is k=15% and for product A, k=10%. Which

project would you recommend to the company for investment?