A new engineer at a construction site is considering two mutually exclusive alternatives for a small operation. Option A would cost $120,000, have a salvage value of $15,000, and net $35,000 per year in net annual profits. Option B would cost $150,000, have a salvage value of $20,000, and net $42,000 per year in net annual profits. The net profit is after operating and maintenance costs. Due to rough service conditions, both systems would be expected to have a service life of only five years. The corporate minimum rate of return for expenditures is 15%.

1. Do incremental analysis between the two alternatives and determine the NPV of the incremental cash flow. Use the standard convention of considering the highest capital project first.
2. Considering the result you obtained in part a, which option would you select and why?