A) Consider the following two projects and their respective cash flow profile of net benefits:

Table 1: Net Cash flows of Benefits for Project 1

Year	1	2	3	4	5	6	7	8	9
Net benefits	-500	450	500	520	600	650	700	800	200

Table 2: Net Cash flows of Benefits for Project 2

Year	4	5	6	7	8	9
Net benefits	-400	150	200	300	400	150

1. Assume that the interest rate in Year 1 is 11% and that it will decline by 1% every year until Year 6 and thereafter stay constant.

By discounting the net benefits, calculate the net present values (NPV) of project 1 as of Year 1, 3 and 7,

Find the net present values (NPV) of project 2 as of Year 1, 4 and 6.

2. Again, assume that the interest rate in Year 1 is 1% and that it will increase by 1% every year until Year 6 and thereafter stay constant.

By discounting the net benefits, calculate the net present values (NPV) of project 1 as of Year 1, 3 and7,

Find the net present values of project 2 as of Year 1, 4 and 6.

Compare the results in questions 1 and 2 above