Dorian International has $75,000 that it can invest for 2.5 years. After that, the funds are needed to repay an outstanding bond issue. The company has two potential projects that are within the funding limit. Project A has an initial cost of $40,000 and cash flows of $24,000 a year for 2 years. Project B has an initial cost of $75,000 and cash flows of $27,000 a year for 4 years. If the required rate of return on both projects is 12 percent, what is your recommendation?

1- Accept Project A and reject Project B

2- Reject Project A and accept Project B

3- Accept either Project A or Project B, but not both.

4- Reject both projects

5- Accept both projects