onsider two mutually exclusive R&D projects that Savage Tech is considering. Assume the discount rate for both projects is $9$ percent.

Project A: Server CPU $\mathrm{.}13$ micron processing project

By shrinking the die size to $\mathrm{.}13$ micron, the company will be able to offer server CPU chips with lower power consumption and heat generation, meaning faster CPUs.

Project B: New telecom chip project

Entry into this industry will require introduction of a new chip for cell phones. The know$-$how will require a large amount of up$-$front capital, but success of the project will lead to large cash flows later on$.$

Year Project A Project B

$0$$ $665,000$$ $866,000$

$1332,000247,000$

$2343,000348,000$

$3251,000352,000$

$4176,000398,000$

$5112,000483,000$