(c) A company is presented with two possible projects as shown in Table Q2 overpage:

Assume costs are incurred at the end of each year. Which project is more attractive using the following methods? i) Net present value at 5% discount rate ii) Net present value at 10% discount rate Your companys weighted cost of capital is currently 6%. If you could select just one of the above projects, which would you choose and why? Would you reject both? How would the level of risk in the project affect your thinking about the discount rate? [10]

Table Q2 Project A 4 years 1.2M/year Construction Time Project B 7 years 1M/year Cost Sale Value 5.9M 9.2M