Chandler Tire Co. is trying to decide which one of two projects it should accept. Both projects have the same start-up costs. Project 1 will produce annual cash flows of $54,000 a year for 6 years. Project 2 will produce cash flows of $48,000 a year for 8 years. The company requires a 15 percent rate of return. Which project should the company select and why?

Select one:

a. Project 1; because the annual cash flows are greater than those of Project 2

b. Project 1; because the present value of its cash inflows exceeds those of Project 2 by $14,211.62

c. Project 2; because the present value of the cash inflows exceeds those of Project 1 by $11,029.36

d. Project 2; because the total cash inflows are $70,000 greater than those of Project 1

e. It does not matter as both projects have almost identical present values.