EnvironPro Co. is trying to decide which one of two projects it should accept. Project 1 is estimated to generate annual cash flows of $58,000 a year for six years. Project 2 is estimated to generate annual cash flows $42,000 a year for eight years. Both projects have the same start-up costs. The company requires a 12% return. Which project should the company select and why?

EnvironPro Co. is trying to decide which one of two projects it should accept. Project 1 is estimated to generate annual cash flows of $58,000 a year for six years. Project 2 is estimated to generate annual cash flows $42,000 a year for eight years. Both projects have the same start-up costs. The company requires a 12% return. Which project should the company select and why?

A.Project 1; because the present value of its cash flows is greater than those of Project 2 by $23,846.16.

B.Project 2; because the total cash inflows are $12,000 greater than those of Project 1.

C.The company is indifferent since both projects generate same amount of net cash flows.

D.Project 2; because the present value of the cash inflows exceeds those of Project 1 by $20,864.09.

E.Project 1; because the present value of its cash flows exceeds those of Project 2 by $29,820.75.