Ariel's hair salon is considering buying airtime for a television commercial to spread the word about their services and get clients during non-peak hours. Alternatively, they could invest in a cheaper newspaper ad campaign. They forecasted the following cash flows for the two options:

Television: Investment of $6,500 would increase profits by $5,200 in the 1st year and $4,500 in the 2nd year.

Newspaper: Investment of $500 today would increase profits by $1,500 in the 1st year and $1,050 in the 2nd year.

The cost of capital is 13.00%.

a. By calculating the Net Present Value (NPV) of each investment, determine which option is better?

a. Television

b. Newspaper

b. By how much is the profit of the better investment greater than the other investment?