Contact Manufacturing, Inc is considering two alternative investment proposals. The first proposal Calls for a major renovation of the company's manufacturing facility. The second involves replacing just a few obsolete pieces of equipment in the facility. The company will choose one project or the other this year, but it will not do both. The cash flows associated with each project appear below and the firm discounts project cash flows at 15%.

Year Renovate Replace

0 -9,000,000 -2,400,000

1 3,000,000 2,000,000

2 3,000,000 800,000

3 3,000,000 200,000

4 3,000,000 200,000

5 3,000,000 200,000

Overall there should be conflicting recommendations based on various criteria. Why is this?

I know that the NVP is making it appear that renovation should take place and IRR is showing replace should take place. Can I get a expert opinion on your thoughts? Which way should they go with the choice?