I need help with the formula so that I can understand how to reach the answer to future questions.

Analyze which piece of equipment is a better capital investment based on the information below (Round to the nearest whole number)

v2.cengagenow.com CengageNOWv2 | Online teaching and le... y! (2,131 unread) - danicandi614@yahoo.c... Page - Live RE-TEST lem #1 of 20 Equipment 1 Equipment 2 Cost $4,000 $4,000 Minimum desired rate of return 10% 10% Expected useful life 2 years 3 years Yearly expected cash flows to be received: Equipment 1 Equipment 2 Year 1 $3,000 $2,500 Year 2 $2,500 $1,500 Year 3 $0 $1,500 Year Present value of $1 at 10% Year 1 0.909 Year 2 0.826 Year 3 0.751 The residual value of Equipment 2 at the end of the Year 2 is $1,350. a. Equipment 2 is a better investment as its net present value is lesser than that of Equipment 1. O b. Equipment 1 is a better investment as its net present value is greater than that of Equipment 2. c. Equipment 1 is a better investment as its net present value is lesser than that of Equipment 2. Od. Equipment 2 is a better investment as its net present value is greater than that of Equipment 1