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Projects A and B are to be compared in terms of the present value of their net benefits (benefits minus costs). Project A requires one

  1. Projects A and B are to be compared in terms of the present value of their net benefits (benefits minus costs). Project A requires one year for construction and costs $150,000. It provides five years of benefits after construction, and these benefits increase from $20,000 to $100,000 annually (annual increment of $20,000). Project B requires two years for construction and costs $250,000. It provides ten years of benefits after construction, and these benefits increase from $40,000 to $220,000 annually (annual increment of $20,000). All amounts are end-of-year values. Which project is better? The cost of capital is 10 percent.

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