3. Royaume Inc. is considering one of two projects. They will select the one with the highest payoff to the company.

Project 1 (4-year project):

First year revenues: $245,000

Revenues years 2, 3 & 4: $155,000 each

Initial investment: $250,000

Costs per annum: $35,000

Project 2 (5-year project):

Annual Revenues years 1-5: $165,000

Initial investment: $295,000

Costs per annum: $25,000

Royaume uses an interest rate of 12.5% compounded annually to evaluate projects. Which is the better choice? NOTE: Use Net Present Value (NPV)