Consider two alternative water resource projects, A and B.

Project A will cost$2,533,000 and will return $1,000,000 at the end of 5 years and $4,000,000 at the end of10 years. Project A has a life of 10 years.

Project B will cost $4,000,000 and will return $2,000,000 at the end of 5 and 15years, and another $3,000,000 at the end of 10 years. Project B has a life of 15 years.

Assuming an interest rate of 10%per year:

(a)Compute the net present value of each Project? Which Project is preferred?

(b)What is the annual net benefit for each Project?

(c)Would the preferred Project differ if the interest ratewas5%?