Question 2

Generic PLC is considering two mutually exclusive project proposals for new investment. The initial outlay of both projects is 300,000 but will yield different levels of cash flows over the life of the project. The projects are estimated to last for five years. They will have no residual value at the end of their lives. Depreciation is charged on a straight line basis. The company uses a 6% discount rate for the cost of capital. The cash flows of both projects are as follows: