Consider economic efficiency of two proposals, A and $B.$

Project A has the following schedule of costs and benefits:

Costs: $$8,000$ immediately $($year $0),$ and $$8,000$ at the end of year $3$

Benefits: $$6,000$ by the end of each of years $1-3$;$$3,000$ by the end of each of years $4-6.$

Project $B$ has the following schedule of costs and benefits:

Costs: $$15,000$ immediately $($year $0),$ and $$1,000$ at the end of year $3$

Benefits: $$10,000$ by the end of each of years $4-6.$

Calculate Net Present Value $($NPV$)$ and Benefit$-$Cost $($BC$)$ ratio for each project using $0\mathrm{.}01(1\%)$ as

discount rate

a$.$ Which project would you recommend?

b$.$ What is the advantage $($difference in NPV$)$ of the recommended project over the second$-$best project?

Now calculate NPV and BC ratio for each project using $0\mathrm{.}05(5\%)$ as discount rate.

a$.$ Which project would you recommend now?

b$.$ What is now the advantage of the recommended project over the second$-$best project?